sept 21/Russia imports a whopping 31,1 tonnes last month/Barclay’s believes that China will use up 1.2 trillion USA as they undergo QT/Brazil very close to default/Comex continues to bleed both gold and silver/TED spreads rise showing banks unwilling to loan to each other/Bellwether Caterpillar now has 33 consecutive months of downward sales showing the globe is now in a depression/Russia pounds ISIS targets/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1133.10 down $5.00   (comex closing time)

Silver $15.22 up 7 cents.

In the access market 5:15 pm

Gold $1133.20

Silver:  $15.22

First, here is an outline of what will be discussed tonight:

At the gold comex today we had a poor delivery day, registering 0 notices for nil ounces  Silver saw 2 notice for 10,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 213.727 tonnes for a loss of 89 tonnes over that period.

In silver, the open interest rose by 1,837 contracts as  silver was up in price by 18 cents on Friday.   The total silver OI now rests at 154,164 contracts In ounces, the OI is still represented by .770 billion oz or 110% of annual global silver production (ex Russia ex China).

In silver we had 2 notices served upon for 10,000 oz.

In gold, the total comex gold OI fell to 414,115 for a loss of 174 contracts. We had 0 notices filed for nil oz today.

We had no changes in tonnage at the GLD,  thus the inventory rests tonight at 678.18 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. It sure looks like 670 tonnes will be the rock bottom inventory in GLD gold. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold will be the FRBNY and the comex.   In silver, we had no change in silver inventory at the SLV/Inventory rests at 320.915 million oz.

We have a few important stories to bring to your attention today…

1. Today, we had the open interest in silver rise by 1,837 contracts up to 154,164 as silver was up by 18 cents in price with respect to yesterday’s trading.   The total OI for gold rose by 7092 contracts to 421,207 contracts, as gold was up $20.10 on Friday.

(report Harvey)

2.Gold trading overnight, Goldcore

Russia purchases a monstrous 31.1 tonnes of official gold

(/Mark OByrne)


3.  China opens for trading 9:30 pm est Thursday night/Friday morning 9:30 Shanghai time

(zero hedge)

4. Barclay’s believes that China’s reverse QE or QT will cost them 1.2 trillion usa in lost reserves. This will be equivalent to a 60% loss of current QE3 and an increase in the 10 year treasury note north of 200 basis points.

(Barclay’s/zero hedge)

5. Maquarie Bank states that we are 12 18 months away from helicopter money

(Maquarie bank/zero hedge)

6.  David Stockman outlines why the Fed’s ZIRP will lead to a bloodbath in stocks.

(David Stockman)

7. Martin Armstrong outlines why “All Hell is about to break loose”

(Martin Armstrong)

8. Goldman Sachs has now come out and states that the Fed will not raise rates until the summer of 2016.

That means it will never raise rates

(Goldman Sachs/zero hedge)

9 Steen Jakobson describes in an interview that the Fed is very worried about China’s deflationary moves.

He then states, what will change in the next few months that will allow the Fed to raise rates.

Answer: never

(Steen Jakobson/zero hedge)

10. The FBI is now opening a criminal investigation into the Malaysian 1 MDB fiasco indicating money laundering

(zero hedge)

11. Russia pounds ISIS targets and then the USA folds.  Russian embassy hit by fire. Netanyahu in Moscow, worried about arms flowing to Hezbollah

(three commentaries/zero hedge)

12 Brazil looks ready to fold under the weight of its huge foreign twin deficits  (current account/fiscal deficits) on top of the huge debt at state owned Petrobras

(shock exchange)

13. Greece puts Syriza back in power/nothing changes

(zero hedge)

14 USA stories/Trading of equities NY

a)TED spreads rising again which illustrates that banks are loathe to loan to each other

(zero hedge)

b) Ray Dalio sees an economic implosion coming.

He illustrates 4 areas of great concern

(Ray Dalio/Bridgewater/zero hedge)

c)Bullard slams Cramer

d) Existing home sales falter

(zero hedge)

e) Caterpillar continues to show declines in monthly sales/now for the 33rd consecutive month

(source/zero hedge)

f) Volkswagen’s potential fine for cheating with their emission software may amount to 18 billion dollars or 20 x the GM fine.

Amazing how the USA punishes foreign companies far greater than their own


15 Physical stories

i)Monetary gold escapes official reporting

(Koos Jansen/GATA)

ii) We have a place where gold is used as money


iii) Interview of Bill Holter by Greg Hunter

(USAWatchdog/Greg Hunter/Bill Holter)

iv) commentary from Bill Holter titled:

“Another FATCA twist”

v) Lawrie Williams/Sharp Pixley on gold demand from Russia and India/

vi Kingwordnews and Eric King interview John Embry

vi A great interview of Michael Pento with Eric King


Let us head over and see the comex results for today.

The total gold comex open interest rose from 414,115 up to 421,207 for a gain of 7092 contracts as gold was up $20.10 with respect to Friday’s trading.   For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month, and today the latter continued with its decline as gold ounces standing rose. We now enter the delivery month of September and here the OI fell by 3 contracts down to 88 . We had 0 notices filed yesterday so we  lost 3 gold contracts or an additional 300 oz  will not stand for delivery in this non active month of September. The next active delivery month is October and here the OI rose by 328 contracts up to 20,833. The big December contract saw it’s OI rise by 5,215 contracts from 284,182 up to 289,397. The estimated volume on today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was estimated at 93,872 which is poor. The confirmed volume on Friday (which includes the volume during regular business hours + access market sales the previous day was poor at 163,451 contracts.
Today we had 0 notices filed for nil oz.
And now for the wild silver comex results. Silver OI rose by 1837 contracts from 152,327 up to 154,164 as  silver was up by 18 cents with respect to Friday’s price . As mentioned above we always have a huge contraction in the OI of an upcoming active precious metal month. The bankers continue to pull their hair out trying to extricate themselves  from their silver mess (the continued high silver OI with it’s extremely low price, combined with the banker’s massive physical shortfall) as the world senses something is brewing in the silver arena (judging from the high volume every day at the comex). We are now in the active delivery month of September. Here the OI fell by 113 contracts to 256. We had 112 notices filed yesterday, so we lost 1 silver contract or an additional 5,000 oz  will not stand for delivery in this active delivery month of September.
The big December contract saw its OI rise by 1708 contracts up to 117,098.  The estimated volume today was estimated at 18,263 contracts (just comex sales during regular business hours) which is poor.  The confirmed volume on Friday (regular plus access market) came in at 48,331 contracts which is very good in volume.
We had 2 notices filed for 10,000 oz.

September contract month:

Initial standings

September 17.2015

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz 6,394.610   oz  Manfra, Scotia
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  (nil)
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices) 88 contracts (8,800 oz)
Total monthly oz gold served (contracts) so far this month 24 contracts(2,400 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 387,307.4  oz
 Today, we had 0 dealer transactions
Total dealer withdrawals:  nil oz
we had 0 dealer deposits
total dealer deposit:  zero
We had 2 customer withdrawal:
 i) out of  Manfra:  32.15 oz
 ii) out of Scotia:  6362.469 oz
total customer withdrawal: 6,394.619 oz
We had 0 customer deposits:

Total customer deposit: nil  oz

We had 0  adjustments:

JPMorgan has only 0.3350 tonnes left in its registered or dealer inventory. (10,777.29 oz)  and only 874,018.71 oz in its customer (eligible) account or 27.18 tonnes

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
To calculate the final total number of gold ounces standing for the August contract month, we take the total number of notices filed so far for the month (24) x 100 oz  or 2000 oz , to which we  add the difference between the open interest for the front month of September (88 contracts) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the initial standings for gold for the September contract month:
No of notices served so far (24) x 100 oz  or ounces + {OI for the front month (88)– the number of  notices served upon today (0) x 100 oz which equals 11,200 oz  standing  in this month of Sept (0.3483 tonnes of gold).
we  lost 100 gold ounces standing in this non active delivery month of September.
Total dealer inventory 162,034.084 or 5.0399 tonnes
Total gold inventory (dealer and customer) =6,871,350.378 or 213.727  tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 213.727 tonnes for a loss of 89 tonnes over that period.
 the comex continues to bleed gold
And now for silver

September silver initial standings

September 17/2015:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  888,138.140 oz

(Scotia, CNT,Brinks) 

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 100,119.500  oz Brinks
No of oz served (contracts) 2 contracts  (10,000 oz)
No of oz to be served (notices) 254 contracts (1,270,000 oz)
Total monthly oz silver served (contracts) 1208 contracts (6,040,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 603,500.075 oz
Total accumulative withdrawal  of silver from the Customer inventory this month 18,635,500.6 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit; nil oz

we had 0 dealer withdrawals:
total dealer withdrawal: nil  oz
We had 1 customer deposits:
i) Into brinks:  100,119.500 oz

total customer deposits: 100,119.500  oz

We had 3 customer withdrawals:
i)Out of Brinks:  519,019.28  oz
ii) Out of CNT:  308,897.740 oz
iii) Out of Scotia:  60,222.12

total withdrawals from customer: 888,138.140   oz

we had 1  adjustment
i) Out of CNT:
we had 23,977.000 oz adjusted out of the customer and this landed into the dealer account of CNT???? an even number in the customer account??
Total dealer inventory: 46.887 million oz
Total of all silver inventory (dealer and customer) 167,769 million oz
 * the comex resumes liquidation of silver. 
The total number of notices filed today for the September contract month is represented by 112 contracts for 560,000 oz. To calculate the number of silver ounces that will stand for delivery in September, we take the total number of notices filed for the month so far at (1208) x 5,000 oz  = 6,040,000 oz to which we add the difference between the open interest for the front month of September (256) and the number of notices served upon today (2) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the September contract month:
1208 (notices served so far)x 5000 oz +( 256) { OI for front month of September ) -number of notices served upon today (2} x 5000 oz ,=7,310,000 oz of silver standing for the September contract month.
we lost 1 contracts or an additional 5,000 oz will not stand in this active month of September.


The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China
And now the Gold inventory at the GLD:
Sept 21.2015: no changes in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Sept 18.2015: NO CHANGES  in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
sept 17.2017: no changes in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Sept 16/2015:  no change in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Sept 15./no change in gold tonnage at the GLD/Inventory rests at 678.18 tonnes
Sept 14./no change in gold tonnage at the GLD/Inventory rests at 678.18 tonnes.
Sept 11/no changes in tonnage at the GLD/inventory rests at 678.18 tonnes
Sept 10. late last night, a huge withdrawal of 4.41 tonnes/this gold is no doubt heading towards Shanghai/Inventory 678.18 tonnes
Sept 9/2015: no changes in gold inventory at the GLD/rests tonight at 682.35 tonnes
Sept 8/ a slight withdrawal and this no doubt was to pay for fees/withdrawal of .24 tonnes/GLD inventory tonight at 682.35 tonnes
Sept 4/ again no changes in gold tonnage at the GLD/Inventory rests at 682.59 tonnes
sept 3/no change in gold tonnage at the GLD/inventory rests at 682.59 tonnes.
Sept 2.2015: no change in gold tonnage at the GLD/inventory rests at 682.59 tonnes
Sept 1/2015: no change in gold tonnage at the GLD/Inventory rests at 682.59 tonnes
August 31./no change in gold tonnage at the GLD/Inventory rests at 682.59 tonnes
August 28.2015:/no change in gold tonnage at the GLD/Inventory rests at 682.59 tonnes
August 27./ a huge addition of tonnage at the GLD to the tune of 1.49 tonnes/Inventory rests at 682.59 tonnes
Sept 21/2015 GLD : 678.18 tonnes

And now SLV:

sept 21.2015: no changes in inventory at the SLV/Inventory rests at 320.915 million oz

Sept 18.2015; no changes in inventory at the SLV/inventory rests at 320.915 million oz

sept 17.2017:no change in inventory at the SLV/rest tonight at 320.915

million oz/

sept 16.2015: no change in inventory at the SLV/rests tonight at 320.915 million oz/

Sept 15./no change in inventory at the SLV/rests tonight at 320.915 million oz

Sept 14./we had another withdrawal of 1.145 million oz from the SLV/Inventory rests at 320.915 million oz

Sept 11.2015: no changes in silver inventory at the SLV/inventory rests at 322.06 million oz

Sept 10.2015: we had no changes in silver inventory at the SLV/rests tonight at 322.06 million oz

Sept 9.2015:

we had another huge withdrawal of 1.336 million oz of silver from the vaults of the SLV/Inventory rests at 322.06 million oz

Sept 8/we had a huge withdrawal of 1.524 million oz of silver from the SLV/Inventory rests tonight at 323.396 million oz.

Sept 4.2015:no changes in inventory at the SLV/rests tonight at 324.923 million oz

sept 3/we had a small withdrawal of 140,000 oz of silver from the SLV/Inventory rests at 324.923 million oz

Sept 2:  we had a small withdrawal of 859,000 oz of silver from the SLV vaults/inventory rests tonight at 325.063 million oz

September 1/no change in inventory over at the SLV/Inventory rests tonight at 325.922 million oz

August 31.a huge addition of 954,000 oz were added to inventory today at the SLV/Inventory rests at 325.922 million oz

August 28.2015: no change in inventory at the SLV/Inventory rests tonight at 324.698 million oz

August change in inventory at the SLV/Inventory rests at 324.698 million oz

September 21/2015:  tonight inventory rests at 320.915 million oz
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 8.9 percent to NAV usa funds and Negative 8.9% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 62.0%
Percentage of fund in silver:37.7%
cash .3%( Sept 18/2015).
2. Sprott silver fund (PSLV): Premium to NAV rises to+1.82%!!!! NAV (Sept 17/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to – .56% to NAV September 17/2015)
Note: Sprott silver trust back  into positive territory at +1.82% Sprott physical gold trust is back into negative territory at -.56%Central fund of Canada’s is still in jail.

Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:

SII.CN Sprott formally launches previously announced offers to CentralGoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64) Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis. Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer. Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer. * * * * *

And now for your overnight trading in gold and silver plus stories on gold and silver issues:


wow!!  Russia is not stopping with its purchases of gold.  In August alone they bought a whopping 31.1 tonnes of gold.  Their usual purchases have been advancing from their usual 6 tonnes, in the last 4 months to 10 tonnes then 13 tonnes, then 24 tonnes and now 31.1 tonnes per month.

(courtesy/Mark O’Byrne/Goldcore)

Russians Buy Gold Bars – 1 Million Ounces In August Alone

Russia’s gold reserves rose to 42.4 million troy ounces as of September 1 compared with 41.4 million troy ounces a month earlier, the Russian central bank announced on Friday.

GoldCore: Russian Central Bank Gold Reserves

The monthly accumulation of 1 million ounces in just one month was one of the more sizeable monthly purchases by China and equates to 31.1 metric tonnes in August alone.

The value of the bank’s holdings rose to $47.68 billion from $44.96 billion a month earlier, Russia said in a statement on its website.

The amount bought was more than the 30.5 metric tons that Russia purchased in March, then the highest amount in six months.
Russia is now the seventh biggest holder of gold reserves after the U.S, Germany, the IMF, Italy and France and the rising gold power China. Russia has more than tripled its reserves since 2005 and holds the most gold bars since at least 1993, International Monetary Fund data shows.

Nations globally have been increasing their gold holdings in recent years, a reversal from two decades of selling. China, Kazakhstan, Ukraine and Belarus are among other nations that have been accumulating gold.

Gold remains a large part of many central banks’ reserves, decades after they stopped using it to back paper and the electronic currency of today.

Russia has been steadily buying bullion since 2007 and the advent of the global financial crisis. Russia was accumulating gold even prior to tensions with the West and international sanctions over the Ukrainian conflict.

Gold has protected the Russian reserves and acted as a hedge as gold priced in rubles has surged over 60 percent in the last 12 months. The plunge in oil prices contributed to sharp falls in the ruble.

Russia added about 13 tons in July and 24 tons the month before that. As tensions escalate with the U.S., the UK and the EU, Russia appears to be intensifying efforts to diversify out of their large dollar holdings and into physical gold.



Today’s Gold Prices: USD 1136.85, EUR 1007.27 and GBP 732.86 per ounce.
Friday’s Gold Prices: USD 1136.00, EUR 992.31 and GBP 726.25 per ounce.

Gold had a 3 percent weekly gain and silver had a 3.5% weekly gain. Gold ended with a gain of 0.73% on Friday while silver rose to as high as $15.43 before ending with a gain of 0.26%.

Gold in USD - 1 Week

Gold in USD – 5 Days

In Singapore, gold dipped lower initially prior to recouping losses. In European trade gold is flat, hovering just below the $1,140 per ounce level. Silver bullion is 0.1% higher to $15.30 today. Platinum and palladium are mixed but essentially flat today.

Monetary gold escapes international trade reports.
(courtesy Koos Jansen)

Koos Jansen: Monetary gold escapes international trade reports


8:33a ET Monday, September 21, 2015

Dear Friend of GATA and Gold:

International trade record-keeping rules exempt the reporting of movement of monetary gold, gold held or purchased by governments and central banks, gold researcher and GATA consultant Koos Jansen reports today. As a result, Jansen writes, gold acquired by the People’s Bank of China or other proxies for the Chinese government is almost certainly not showing up in international trade statistics.

This is more evidence that gold transactions by governments are being concealed for policy purposes.

Jansen also notes that the International Monetary Fund classifies gold as the highest reserve asset of central banks, above even the IMF’s own special drawing rights, because even the IMF recognizes gold as “the only financial asset without counterparty liability.”

As your secretary/treasurer long has maintained, gold is still at the center of the international financial system, despite its constant disparagement by financial elites and mainstream financial news organizations, and the location and disposition of national gold reserves are secrets far more sensitive than the location and disposition of nuclear weapons. For while nuclear weapons can destroy the world, gold and the rigging of its market can control it.

The IMF itself has admitted as much confidentially, as through its secret March 1999 staff report confirming that central banks conceal their gold swaps and leases to facilitate their secret interventions in the gold and currency markets:

Jansen’s report is headlined “The London Bullion Market and International Gold Trade” and it’s posted at Bullion Star here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Here is an example of how gold can be used as money again:
(courtesy zero hedge/

Going Back To What Works: Gold Is Money Again (Thanks To Utah)

As of today you really can pay your taxes, your credit cards, your mortgage, shop at Costco, and buy your groceries without so much as a bank account while using sound money.

As explains,

The fact that Texas announced that it withdrawing its gold from Manhattan and is creating a state gold depository generated a good deal of interest because there would also be a way to transfer gold to others via said depository. So much interest that Texas received calls from all over the United States from folks that wanted to be part of such a system. The articles covering the future Texas depository cumulatively received millions of views. What was missed in all of this coverage is that a functional, and legal depository that allows anyone in the country to pay and save in gold dollars already exists. In Utah.


The United Precious Metals Association in Utah has gold and now separate silver accounts that act as checking accounts do at any bank or credit union. The way it works is that members deposit Federal Reserve Notes (or paper dollars) into their UPMA account which in turn translates them into golden dollars (or silver). The golden dollars are based off the $50 one ounce gold coins produced by the Treasury of The United States. They are legal tender under the law and are protected as such. So if I were to deposit $1,200 FRNs then I would have $50 golden dollars.


UPMA is the only institution in the country that I know of that doesn’t have a buy/sell spread on their Golden Eagles or Silver Eagles. This means that all my $1,200 FRNs once converted to gold could be spent the next day without losing anything to any sort of premium. The price of a Gold Eagle is 5.8% above spot but when you ‘cash out’ you do so at 5.8% above gold spot. This effectively removes that barrier from sound money.


This year the UPMA released a gold backed debit card via American Express.The way it works is that a member may spend up to half of their gold or silver dollars in any given month period using the card. When I interviewed the founder of UPMA today, Larry Hilton, I learned that the way the card works is that they have made a contract with American Express so that UPMA members can use what are technically credit cards as a debit card anywhere American Express is accepted. The members are added on as ’employees’. Right now there are already hundreds of people around the country using this method of payment. They are literally spending gold on groceries without losing anything to premiums or in transaction fees to UPMA. In fact they get 1% cash back in gold.


This service is available to anyone in the United States and requires no credit check whatsoever. Using the billpay service online one can pay for what American Express can’t such as credit card bills, property taxes, or your mortgage. The golden dollars are simply converted right back into FRNs and paid out. When asked Mr. Hilton affirmed that there are many people that don’t store anything in the banks anymore thanks to this service. They are obsolete if you want to use sound money. There are no fees associated with the use of the card. Members that store more than $50 in golden dollars do pay a small storage/membership fee of 10 golden cents or $2.50 FRNs and an additional 0.25 FRNs for every additional $50. These $50 Golden Eagles can also be withdrawn and sent to you directly.


The United Precious Metals Association has the full backing of Utah Attorney General Sean Reyes who also uses the service. The legal foundation was set up in 2010 and 2012 here in Utah where the vault is located. Many members of the board including General Counsel Larry Hilton are lawyers that specialize in law regarding the use of legal tender.


An elected board of members makes regular audits to assure that all of the gold and silver is there and reports to the general membership every year at the monetary summit. This year it will be held on October 17 in Salt Lake City. The vault is insured from theft and fraud via the Llyods of London. They hold a 100% reserve ratio.

And as UPMA summarizes, this is nothing new and it is not different this time...In fact we are going back to what works…

All very unmodern? The gold standard is not up-to-date only if we have a yen for running away from economic success in the form of stable prices and major growth. After Nixon went off gold in 1971, abrogating the conversion agreement with the foreign nations, and keeping gold-holding illegal in the United States, inflation did things that were unheard of. The price level leapt by 200% from the late 1960s to the early 1980s, a period also bedeviled by the economic sluggishness known as “stagflation,” where double-dip recessions came every few years and the long term growth rate sunk below 2%. In the 1980s and 1990s, the Fed returned to conducting monetary policy in view of the gold price, and sure enough the consumer price index stabilized at one-third the stagflation level and growth rebounded past 3.5% per year. The verification just kept on coming: key on gold stability – effectively making the dollar convertible on demand to gold at a fixed price – and watch prices stay the same and growth shoot the moon.


In the 2000s, we are witness to a Fed that has disdained the gold price now for a decade. The result has been the loss of that decade to economic growth, as well as stirrings in key commodities such as oil and food, if not the brutal comprehensive arrival of inflation. If the Fed decided today to target the price of gold as the pole star in its monetary operations, there is no historically conversant reason to believe that we would have unfold before us anything but yet another era of price stability and maximal economic growth. For this is the only thing that has ever resulted from gold standards and their approximations throughout our history.


The arc of time has revealed connections that we have the opportunity to re-forge today. The United States became the largest economy in the world in the 1870s, was two-and-a-half times larger than the second-place nation in 1913, boomed along with everyone else in the Bretton Woods era, and in the 1980s and 1990s did not succumb to the “Eurosclerosis” or any “Japan disease” that afflicted its major economic partners. In every episode of fantastic economic performance – in terms of both price stability and major growth – there was a commitment to gold.

Choice in currency is being recognized as a basic human right around the world. Utah was the first State to make gold and silver coins legal tender alongside the U.S. dollar on March 25th, 2011.


A superb interview with Michael Pento as he describes in detail how the financial globe will disintegrate:
(courtesy Michael Pento/Kingworldnews/see Kingwordnews and Jon Embry for the Michael Pento interview)



(courtesy Lawrie Williams/Sharp Pixley)

LAWRIE WILLIAMS: Sea-Change in Gold Sentiment and Misconceptions on Russia


We have already noted here on the huge physical gold withdrawal levels out of the Shanghai Gold Exchange (SGE) so far this year and high Indian gold import levels, although to be fair the drop in gold premiums of late in the latter country to a reported discount do suggest gold consumption there may be waning a little.  But regardless – even if Indian gold consumption slips in the second half of the year the combination of Chinese demand as expressed by the SGE figures, central bank buying – notably by Russia, China (which is now reporting gold reserve increases month by month), Kazakhstan and others – and evidence of strong coin and bar purchases in the USA and Germany in particular all suggest that gold could be at a turning point in that, whatever some gold analysts will tell you, there could be something of a significant gold supply/demand squeeze ahead. The figures out of all these nations noted above, plus significant demand elsewhere, do suggest global demand strongly in excess of global new mined supply – although the mainstream analysts appear to disagree, largely due to their interpretations of Chinese demand which is by far the biggest element involved in their calculations.

On the supply side, global new mined gold output may well be up again this year, but only by a small amount, and there has been some offloading out of the gold ETFs.  But this latter has been somewhat erratic and is hugely below the levels seen in 2013 which had a big adverse impact on the gold price that year, and in any case appears to be countered by a continuing fall in supplies from the scrap market due to lower gold prices.

There are arguments that gold supply/demand fundamentals have little short term impact on the gold price which is currently largely driven by speculative activity on the COMEX gold futures market.  But eventually fundamentals have to have an impact – and with the prospect of more and more of the gold trade moving to Asia, where the primary market drivers are in physical metal rather than futures, we could be beginning to see something of a sea change.  Gold’s recent price performance at least showing some limited strength, despite virtually every bank analyst of note predicting further sharp falls, could even be beginning to suggest a change in sentiment.  In the overall commodities sector gold and silver have been performing far better than most others so far this year – even in the US dollar.  They have also performed better than most major stock indices.  Their prices have indeed fallen, but only by a small percentage in US dollars – and have actually risen in most producer currencies.

There still seems to be something of an anti-gold mainstream media bias with misleading headlines and commentary – no doubt fed by various parties interested for whatever reasons for keeping the gold price relatively weak – and perhaps trying to drive it lower.  But then this media bias is not just confined to gold itself, but also to those nations which may be seen to be particularly supportive of gold like China and Russia, but where government policies may seem to run counter to those of the West.  We have commented in some detail on the apparent strength of gold demand inside China despite reports that it is declining – but what of Russia, another nation having an important impact on gold demand, but which is also heavily in the sights of Western media spin?

Last year the Bank of Russia was the world’s largest known central bank buyer of gold, taking in 171 tonnes of the precious metal (When we say largest known we don’t know how much China may, or may not have bought – only that China has a bigger overall reported gold reserve than Russia by a few hundred tonnes.)  This year Russia has been buying more and has year to end-August added a further 112 tonnes which is on track towards a similar level of purchases as last year.

The media makes great play of the Russian economy supposedly being crippled by Western sanctions and by the drastic falls in oil and gas prices – but it may be salutary to note that the Russian stock exchange index is only down 7% from its 52 week peak, and up year to date – and is thus performing far better than the U.S. Dow.  Russia is probably more insulated from falling commodity prices than many other nations due to the decline in the value of the ruble against the US dollar and its economy protected by its prime trade links being with the FSU nations and China rather than with the West.  It is also moving rapidly to make itself even less dollar dependent in the future by further enhancing those trade links which avoid utilisation of the US dollar altogether.

The Western media also makes great play in that Russia’s dollar reserves have been declining sharply – supposedly in support of the falling ruble (which incidentally is only down around 4% against the dollar so far this year, far less than the Canadian or Australian dollar for example – although you’d never actually believe this from most Western media headlines and commentary.)  This suggests that any fall in the Russian Central Bank’s dollar denominated holdings may be as much to do with dollar divestment as exchange protection.

The Russian MICEX stock market index is actually up over 20% since January 1st this year – compare that with the Dow which is down 8% over the same period.  Which of these, if either, would suggest an economy in collapse?  You can’t believe media headlines and generalities which often seem to be pulled out of thin air with little reference to the facts.

As readers may know, I am at the Denver Gold Forum this week and perhaps some of the factors addressed in this commentary may be raised by some of the expert speakers here, as well as the views of gold mining executives on where they see markets trending. One can already detect a little more optimism in the sector – let’s hope for gold investors and holders that this optimism is not misplaced and the sea change in sentiment is really there.


Gold suppressors and Goldman Sachs are still in charge, Embry tells KWN


2:50p ET Monday, September 21, 2015

Dear Friend of GATA and Gold:

The gold and silver price suppressors and Goldman Sachs are still running the world, Sprott Asset Management’s John Embry tells King World News today, and the longer they keep at it, the more catastrophic the outcome will be. An excerpt from Embry’s interview is posted at the KWN blog here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Bill Holter being interviewed by Greg Hunter:
(courtesy Greg Hunter/Bill Holter

Fed Has Lost Control-Bill Holter

4By Greg Hunter’s   (Early Sunday Release)

Financial writer Bill Holter contends the recent announcement of the Federal Reserve not to raise rates means the “Fed has Lost Control.”Holter explains, “Whatever the Fed does is wrong. The reason I say that is because no matter what they do, they can’t fix what they have already done. There is no policy at this point that can repair where we are at this point as far as debt ratios, derivative outstanding and the money supply exploding. Nothing that they do now can fix it. The only thing that remains is a reset.”

In the reset, Holter contends, “All debt will be impaired. . . . A reset is going to be a shutdown of the system. Everything will stop. When you are talking about bonds being impaired, you are probably going to see that start or begin in the derivatives market. The derivatives is the tail that has been wagging the dog for years. Derivatives are leverage, and you can use that leverage to control prices. If they can put $1 down and control $100, you can pretty much control the price of an asset, and that’s what they have done. They have supported stocks. They pushed interest rates down and supported bonds. They have suppressed gold and silver prices. They were able to paint a picture using derivatives with 100 to 1 or more of leverage, and when they lose control, that derivative chain between bank A, B, C and D is going to snap. When it snaps, the music stops and everything is going to stop. Once something does break, I don’t think it will take much more than 48 hours for you to wake up in the morning and find that nothing works. Your credit card doesn’t work. Your debit card doesn’t work. You go to your bank and the ATM doesn’t work, and nothing is going to work. The entire financial system will shut down. The reset will be the reopening. It’s not the closure that will kill you, it’s going to be the reopening. In the reopening, everything is going to be revalued. How long will it take to reopen? I have no idea. It could be a week, two weeks, one month, two months or six months. Who knows, but the financial landscape is going to look different, and values will be unrecognizable.”

This is not going to just be a financial problem, but a problem getting things you need to live. Holter says, “These big stores get stocked up every single night. . . . The average store only has food for about two or three days. So, this is not going to just be an issue about you paying your bills. It’s going to break down so badly it is going to be an issue about whether or not you can get food.”

On gold and silver, is this the bottom? Holter says, “To answer your question, yes, I think this is the bottom. Can they push the price down again?   It’s possible, but like you say back in 2009, silver on the COMEX was trading just under $9, and to buy retail metal, you could not get anything under $15. . . . The physical market has hit a hard bottom.”

Join Greg Hunter as he goes One-on-One with gold expert Bill Holter from

(There is much more in the video interview.)



and now his important commentary for today:


(courtesy Bill Holter/Holter Sinclair collaboration)


Another FATCA twist.


  News out of Canada this past week provided a bit of a twist in the FATCA rules.  As you know, FATCA requires the reporting of bank and financial assets held overseas by U.S. citizens and their institutions.  Several readers sent this along believing the United States IRS was engulfing the records of Canadian citizens.  I don’t believe this to be the case.  As I understand it, this ruling will only affect U.S. citizens living in Canada or people with dual U.S./Canadian citizenship.
  While this ruling was not a blockbuster, I believe it is important to revisit FATCA itself.  As I understand it and have been told by tax professionals, the law only pertains to banks (accounts) and brokers (securities).  Silver or gold held in non bank vaults which are “segregated” or “allocated” do not generate reporting requirements either from the vault or the customer.  Effectively, holding gold or silver in a non bank vault outside of the U.S. as long as it is in segregated storage is currently a legal avenue to having assets of value outside of borders with no reporting requirements.  Could this change?  Yes it could but it will be a difficult one to enforce as a non bank vault has no financial or banking charter which could be used as leverage.  What I am saying is this, the way it currently stands, non bank vaults cannot be threatened with their license being pulled.

  This current situation is an important one because it is still a legal “escape route” for capital.  You can do this as easily as the elite can, though not in magnitude of course.  As I wrote Friday, should you desire help with storage, please contact me and I will put you in touch with the storage specialist at Miles Franklin.
  It has now been nearly six months that Jim Sinclair and I have been working together.  We wanted to give it some time to make sure our partnership “fit” and was comfortable.  It is!  We are like minded and have complemented each other by asking hard questions and pushing each other to think things “further” through.  As many of you may know, prior to partnering with Jim I wrote for Miles Franklin’s blog.  Many never knew I also brokered metal for them.  I was paid to write, had I publicly written “call me” it would not have been fair to the other brokers in the office so I remained muted regarding my capacity as a broker.
  I am writing now at Jim’s request because he believes it is time.  He has done a couple of large trades through Miles Franklin and was quite pleased.  After his “testing” Miles Franklin and our time working together, Jim wants me to let you know that I broker metal.  I myself have completed numerous trades with them and have 100% in their ability to deliver. 
  Please e-mail me or give me a call and I will be happy to work with you to secure, at least in part, your financial future.
Standing watch, 

And now your overnight Monday morning trading in bourses, currencies, and interest rates from Europe and Asia:

1 Chinese yuan vs USA dollar/yuan rises a bit in value, this  time at   6.3692/Shanghai bourse:  in the green and Hang Sang: red

2 Nikkei closed 

3. Europe stocks all in the green except German DAX     /USA dollar index up to 96.82/Euro down to 1.1269

3b Japan 10 year bond yield: falls to .314% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.48

3c Nikkei now just above 18,000

3d USA/Yen rate now above the important 120 barrier this morning

(providing the necessary ramp for all bourses)

3e WTI:  45.37 and Brent:  48.25

3f Gold down  /Yen down

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil up for WTI and up for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .665 per cent. German bunds in negative yields from 4 years out

 Greece  sees its 2 year rate falls to 10.72%/Greek stocks this morning down by 0.99%:  still expect continual bank runs on Greek banks /

3j Greek 10 year bond yield falls to  : 8.29%  

3k Gold at $1131.00 /silver $15.12  (8 am est)

3l USA vs Russian rouble; (Russian rouble up 2/3 in  roubles/dollar) 65.81,

3m oil into the 45 dollar handle for WTI and 48 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar.

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9682 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0910 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p Britain’s serious fraud squad investigating the Bank of England/

3r the 4 year German bund now enters in negative territory with the 10 year moving closer to negativity to +.665%

3s The ELA lowers to  89.1 billion euros, a reduction of .6 billion euros for Greece.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Greece votes again and agrees to more austerity even though 79% of the populace are against.

4. USA 10 year treasury bond at 2.16% early this morning. Thirty year rate below 3% at 2.95% / yield curve flatten/foreshadowing recession.

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.


(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

US Equity Futures Hit Overnight Highs On Renewed Hope Of More BOJ QE


After sliding early in Sunday pre-market trade, overnight US equity futures managed to rebound on the now traditional low-volume levitation from a low of 1938 to just over 1950 at last check, ignoring the biggest single-name blowup story this morning which is the 23% collapse in Volkswagen shares in the aftermath of the company’s emissions lying scandal which has cost the company €15 billion in market cap and has dragged Germany’s Dax lower...

and instead have piggybacked on what we said was the last Hail Mary for the market: the hope of more QE from either the ECB or the BOJ. Tonight, it was the latter and while Japan’s market are closed until Thursday for public holidays, its currency which is the world’s preferred carry trade and the primary driver alongside VIX manipulation of the S&P500, has jumped from a low of just over 119 on Friday morning to a high of 120.4, pushing the entire US stock market with it.

As Reuters reported over the weekend, sources suggest that the BoJ is again contemplating an overhaul of its QQE program with an increase in its JPY 80 trillion monetary base as its main option to achieve its inflation goal, adding that it has not ruled out moving away from its money printing program in the long term due to a lack of success in reaching the price goal. “QQE is not a programme intended to last another five, 10 years,” said a former BOJ policymaker with knowledge of current monetary policy deliberations.

However, the reason why ultimately any boost to Japan’s QE will fail is the same one we first pointed out in late 2014 and then again a few weeks ago: “with borrowing costs near zero, some BOJ officials doubt whether expanding QQE would help the economy much and some worry they might eventually run out of sellers if they accelerate the programme.… “Given the pace of the BOJ’s purchases under the QQE program that is under way … you could run out of willing sellers of JGBs by the end of 2017,” said Kalpana Kochhar, the IMF’s mission chief for Japan.” This is precisely what we warned on September 4, and while we are glad to see the caution making mainstream media, the implications of this realization will surely not be grasped for many months to come.

Elsewhere in Asia, equity markets traded mostly lower following Friday’s negative close on Wall Street, where the weakness in the commodity complex pressurised global equities. ASX 200 (-2.0%) underperformed as energy and basic material names dragged the index lower, while Shanghai Comp. (+1.9%) pared its opening weakness led by strength in the industrial sector, as the UK and China met to discuss opportunities for Chinese investment in infrastructure projects. Japanese markets are closed until Thursday due to several public holidays.

In Europe, Volkswagen (-23.0%) shares plunged following the reports that the automaker could face an USD 18 billion fine over the software made to meet clean-air standards during official emissions testing. At the same time, London listed RSA (-21.0%) shares lost over 20% in reaction to the reports that Zurich has pulled its bid for the company because it expects USD 200mln loss on the Chinese Tianjin port explosions last month. Nonetheless, despite the underperformance by the German DAX index (-0.5%), stocks in Europe traded mostly higher (+0.6%), with utilities and healthcare names leading the move higher.

The upside, albeit restrained, meant that both Bunds and Gilts traded lower, with Portuguese bonds outperforming their EU counterparts in reaction to Friday’s upgrade by S&P. This week will see supply slip to EUR 9bIn from the near EUR 15 billion seen last week, while in terms of redemptions, participants will have to wait until next week when things begin to pick up on this front.

In FX, the key driver was the previously mentioned JPY weakness which was observed across the board following reports citing sources that the BoJ is to contemplate an overhaul of its QQE program with an increase in its JPY 80trl monetary base as its main option to achieve its inflation goal, while elsewhere the USD remained relatively flat (USD-index: +0.1%). At the same time, analysts at Goldman Sachs believe there is scope for further EUR weakness as the ECB will most likely press ahead and increase its QE program to meet its inflation target.

In short: with the Fed out of the picture, the hope is that either the BOJ or the ECB can muster some further monetization especially with China Quantitative Tightening, or suddenly the global bull case for the past 7 years falls apart.

In commodities, gold traded relatively flat overnight and remained close to its best levels in 3 weeks, as the precious metal held onto most of last week’s FOMC-inspired gains. Elsewhere, copper prices declined to 2-week lows, while iron ore also saw mild pressure and zinc fell by around 3% as concerns over weakening Chinese demand continue. In terms of the energy complex, WTI and Brent futures both head into the North American crossover in positive territory, above USD 45.00 and USD 48.00 respectively to pare back all of last week’s FOMC inspired losses.

Today’s US calendar is light with just the NAR’s conflicted existing home sales report on the docket; the central bank arena is more active with comments from ECB’s Coeure, Nowotny, Praet and Hansson and also Fed’s Lockhart and Bullard on deck.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Despite the underperformance by the German DAX index after Volkswagen saw sharp losses, stocks in Europe traded mostly in the green, with utilities and healthcare names leading the move higher
  • JPY weakness was observed across the board following reports citing sources that the BoJ is to contemplate an overhaul of its QQE program with an increase in its JPY 80trl monetary base
  • Today’s highlights include the latest US existing home sales report, as well as any comments from ECB’s Coeure, Nowotny, Praet and Hansson and also Fed’s Lockhart and Bullard.Treasuries decline to open the week with 2Y/5Y/7Y auctions scheduled to start tomorrow, ECB’s quarterly hearing on Wednesday, U.S. GDP on Friday.
  • China’s economy isn’t as weak as it may look, according to a private survey from a New York-based research group that says it’s a myth the nation’s slowdown is intensifying
  • Richmond Fed’s Jeffrey Lacker, an outspoken anti-inflation hawk who dissented in favor of higher rates at the Fed’s policy meeting on Thursday, said failing to tighten had raised the risk of “adverse outcomes” for the nation
  • San Francisco Fed’s John Williams said the central bank’s decision this week to keep rates near zero was a close one, and reiterated that he expects an increase in 2015
  • Economists see it as increasingly likely that the ECB will be called on its pledge to boost its EU1.1t bond-buying program if needed amid stubbornly low inflation; Goldman says euro may fall up to 10 U.S. cents
  • Alexis Tsipras and his Syriza coalition emerged from a second election in eight months with a level of support barely diminished from the emphatic victory that catapulted him both into power and a standoff with the euro region
  • Sentiment toward stocks is plunging at a historic rate, falling by some measures at the fastest pace since Volcker had just finished pushing up interest rates in the 1980s
  • Sovereign 10Y bond yields mixed. Asian stocks decline, U.S. equity-index futures gain. Crude oil and copper higher, gold lower


DB concludes the weekend news roundup

With a fairly light data-docket ahead of us for the next five days, markets look set to remain on edge in the aftermath of last Thursday’s Fed decision and Yellen verdict. The highlights look set to be the final Q2 GDP reading and durable goods data but it’s Fedspeak that will be closely watched however with Lockhart, Bullard and George all due to make various appearances over the next five days while Fed Chair Yellen is due to deliver a lecture on Thursday. The usual full run-down is at the end of this morning’s report. Markets certainly need some soothing at the moment after Friday’s price action saw a continuation of the post FOMC fallout. The S&P 500 tumbled 1.62% and is now 3.1% off the pre-Yellen press conference highs. 10y Treasury yields fell another 5.7bps and are now 16bps down from the highs just before the FOMC decision. European rates markets, playing catch-up, also saw a decent leg lower across the board with the majority of markets down 12 to 16bps.

We haven’t had to wait too long for the first Fed official comments however with Williams, Bullard and Lacker all speaking over the weekend. San Francisco Fed President Williams, seen as a centrist in the Fed camp and a voter this year, said that last week’s decision was a close call and that there were arguments on the side of the ledger arguing for more patience. Williams did however go on to say that ‘I view the next appropriate step as gradually raising interest rates, most likely starting sometime later this year’. Another voter this year, the more hawkish Richmond Fed President Lacker who dissented on Thursday said that exceptionally low real interest rates are unlikely to be appropriate for an economy with persistently strong consumption growth and tightening labour markets and that such ‘departures are risky and raise the likelihood of adverse outcomes’. Adding to the hawkish rhetoric was St Louis Fed President Bullard, a voter next year and who said that he argued against the decision to hold at last week’s meeting and that the decision has ‘created rather than reduced global macroeconomic uncertainty’. Bullard believes that the Fed is ‘ready to go’ next month should conditions warrant.

That takes us to the latest in markets this morning where equity bourses in Asia have largely followed the lead from the US on Friday to kick start the week on the back foot. The Hang Seng (-1.30%), Kospi (-1.60%) and ASX (-2.63%) have seen decent legs lower while markets in Japan are closed, although mainland bourses in China have rebounded following an initial plunge at the open. The Shanghai Comp is +0.67% at the break after opening over a percent down, while the CSI 300 is +0.61%. That’s despite some disappointing business conditions data this morning out of China, with overall business conditions falling 4.7pts in September to 51.3, while future expectations have fallen to their lowest level since 2007. Credit markets are weaker this morning, with indices in Asia and Australia around 3bps wider. Meanwhile, US equity market futures are pointing towards another soft start, down around half a percent.

The other news story from the last 48 hours has been over in Greece where the General Election results are in. With 99.5% of the votes counted for, Syriza have secured a larger than expected victory with 35.5% of the votes, ahead of New Democracy at 28.1%. The victory means Syriza are set to secure 145 seats, with ND at 75 seats. A coalition with current partners the Independent Greeks (who received 3.7% of the votes) looks set to remain in place with a majority total of 155 seats. Meanwhile the Popular Unity party, formed by Syriza rebels, looks set to fail to garner enough votes to market it into parliament. DB’s resident Greek expert George Saravelos notes that the election outcome therefore represents a re-affirmation of the prior political status quo with one key difference: a strong political endorsement of Tsipras’ decision to compromise with European creditors and maintain Greece’s Eurozone membership. George notes that with the Syriza parliamentary group now consisting of more moderate MP’s and the vast majority of opposition parties also in support of European compromise, the election is now likely to mark a period of political stability in Greece. In the coming days, appointments to key ministry posts will be made, before negotiations commence. A final set of prior actions to be passed through parliament sill need to be agreed with creditors to disburse the last sub-tranche of the first installment of funding, following which the first full program review can begin late next month. A potential successful conclusion of the first program review would open the door for the provision of additional debt relief to Greece, although this won’t come before the outstanding issues around pension and collective wage bargaining in particular are resolved. Importantly however, with Tsipras gaining the political endorsement to compromise with Europe, continued progress in coming months on program implementation should be possible.

Back to the rest of markets on Friday. Despite the bull flattening across the Treasury curve (30y yields -7.0bps, 2y yields -0.2bps), the US Dollar actually had a decent session with the Dollar index closing up +0.33%, surging over a percent off the day’s lows. Credit weakened albeit in choppy trading with CDX IG (+1.5bps) eventually widening into the close with primary issuance largely grinding to a halt. The risk-off sentiment was reflected through the commodity complex where we saw Oil sell-off (WTI -4.73%, Brent -3.28%) along with Copper (-2.52%), while Gold (+0.68%) saw a decent bid. Prior to this European equity markets had tumbled with the Stoxx 600 closing down 1.78% and most major DM markets down 2-3%.

With little in the way of data other just a weaker than expected US Conference Board leading index for the month of August (+0.1% mom vs. +0.2%), the focus was instead on some of the various Central Bank speakers we heard from on Friday. The ECB’s Coeure said that the Fed’s decision to leave rates on hold ‘is a confirmation of our diagnoses of the existence of risks in the global economy’. Meanwhile, his fellow board member, Praet, said that the ‘we share the concerns about the outlook for the global economy’. Praet went on to emphasize that the ECB won’t hesitate to act if they came to the conclusion that the shocks are so severe and long-lasting that they would lead to a lower inflation forecast for the euro area. Over at the BoE meanwhile, the Bank’s Chief Economist Andy Haldane warned that the case of the UK raising rates is ‘some way from being made’. Haldane noted that the balance of risks to UK growth and inflation at the two-year horizon is skewed ‘squarely and significantly to the downside’.






Chinese Shanghai opens 9:30 est Sunday night/Monday morning 9:30 am).

Later in the evening, the crooks decided to borrow yen again  (ramp USA/Yen) and this caused most bourses to rise and of course led to the whacking of gold at 7 pm this morning.

(courtesy zero hedge)

Global Stocks, EM FX Extend Losses Despite China Saying “No Collapse Is Nigh”

US equity futures have retraced the late-day ramp from Friday with Dow down around 65pts. Asia is opening weaker (NKY -900 from Thursday highs) with EM FX appearing not to get the “but we didn’t hike” message from The Fed with MYR the worst hit for now (after a few days of strength). EM outflows accelerated according to Morgan Stanley, down 6% AUM in 12 weeks. PBOC devalued the Yuan fix by 0.11% (the most in 2 weeks). While Fed uncertainty and fears about China have caused global derisking, PBOC chief Fan says “the economy is stable,” and China’s Beige Book suggests ‘everything is awesome’, as the survey summarizes,“perceptions of China may be more thoroughly divorced from facts on the ground than at any time in our nearly five years of surveying the economy.”If that’s the case, then why is Janet in panic mode?


Dow futures have retraced Friday’s late-day ramp…


And Nikkei 225 is down 900 points from Thursday’s peak BoJ manipulation highs…


EM FX continues to weaken..


  • Baht declines 0.2% to 35.710 per dollar, set to snap two-day rally

EM equity fund outflows of $2.2b for week ended Sept. 16 mainly driven by Asia funds ($1.8b),compares with avg $6.5b outflow in last 4 weeks, Morgan Stanley analysts Jonathan Garner and Pankaj Mataneywrite in Sept. 18 note.

  • Cumulative 12-week outflow reaches US$40.2b, or 5.6% of assets under management
  • Taiwan, India, Korea had largest inflows
  • Philippines had biggest weekly outflow since Oct. 2013

New Zealand Consumer Confidence tumbled to 3 year lows…

*  *  *

With China open, the propaganda ramps up.. It appears it is time for some central banker credibility to be lost…

China’s economy isn’t as weak as it may look, according to a private survey that says it’s a myth that the nation’s slowdown is intensifying.


“No collapse is nigh” in the aftermath of the stock market plunge and currency devaluation, according to the third-quarter China Beige Book, published by New York-based CBB International and modeled on the survey compiled by the Federal Reserve on the U.S. economy. Capital expenditure rebounded slightly in the period and the services sector showed strength, the report said.


“Perceptions of China may be more thoroughly divorced from facts on the ground than at any time in our nearly five years of surveying the economy,”CBB President Leland Miller wrote in the report.

And then The PBOC put everyone straight…


Chinese central bank Deputy Governor Fan Yifei said the country’s economic structure continues to improve and trade surplus remains, providing solid foundation for stable yuan and financial market,Financial News reports, citing Fan’s comments at a forum Sept. 19.

  • Fan called for strengthening currency swaps with Asean countries and pushing forward currency trade with these countries, including direct trading

So why did Janet blink then?

Margin debt declined…


And Chinese stocks open lower…


The PBOC weakened the fix by the most in 2 weeks


Finally, on a sidenote, China Mobile reported its additional subscriber base grew at the slowest in 2015…



But but but Tim Cook told Cramer everything was awesome?


Charts: Bloomberg



What a joke!!


The dollar climbs after Bullard’s hawkishess  (non voting).


(courtesy zero hedge

EURUSD Dumps To 1.1200 After Bullard’s Hawkishness

It appears Jim Bullard’s words (since his deeds are of no use as he is not a voter) were just enough to reassure the world that Yellen was “just kidding” about the whole global growth worries and market turmoil and is quiote ready to raise rates as soon as possible (even if FF futures say “nein”). EURUSD is now down over 250 pips since Friday highs, battered back near a 1.1100 handle…



Charts: Bloomberg






Barclay’s believes that before this is all down, China’s quantitative tightening  (or reverse QE) could top 1.2 trillion.  If this becomes true then this is equivalent to a 200 basis tightening on the 10 yr USA treasury note and would also offset close to 60% of QE3.



(courtesy zero hedge)

China’s “Reverse QE” Could Top $1.2 Trillion, Barclays Says

Last week, we updated our assessment of capital outflows in China, noting that based on available information, it appears that outflows may have surpassed $300 billion from early July through mid-September. That figure comes from our analysis of July TIC data, Goldman’s assessment of underlying currency demand (comprised of outright spot plus freshly-entered forward contracts), and Nomura’s estimates for onshore spot intervention and offshore spot and forward meddling by the PBoC in September.

As we began to detail late last year when falling crude began to pressure the accumulated petrodollar reserves of the world’s energy exporters, and as we and finally countless others have discussed in the wake of China’s shift to a new currency regime, FX reserve drawdowns serve to tighten global liquidity and work at cross purposes with DM QE. This creates a dilemma for Fed policy as hiking rates could accelerate outflows from emerging markets thus putting further pressure on already falling USD reserves. In other words, in today’s world, a 25 bps hike by the FOMC would be amplified and transformed into something much larger once it reverberates throughout the global financial system.

Assessing how large the cumulative outflow from China may end up being is important as it proxies for the expected drain on global liquidity (or at least part of the drain on global liquidity, as we must also consider the possibility that net petrodollar exports turn deeply negative in the face “lower for longer” crude). Previously, we suggested that outflows could eventually reach $1.1 trillion. That figure was derived from a look at BofAML’s assessment of the size of the RMB carry trade, which is now unwinding.

Needless to say, rampant speculation that China is targeting a much larger devaluation than that implied by the August 11 “one and done” reset only serves to put more pressure on RMB, necessitating still more reserve drawdowns. Of course each round of intervention sucks liquidity out of the system which means Beijing must offset the tightening with RRR cuts and liquidity injections. But the very act of cutting rates and injecting cash is perceived by the market as easing, which puts more pressure on the yuan and the vicious, self-feeding loop is perpetuated.

On Monday, we get a fresh take on all of the above courtesy of Barclays who says that before it’s all said and done, China’s FX reserves could take a hit on the order of $1.2 trillion.

First, Barclays endeavors to explain when the adjustment will be sufficient for things to balance out or, alternatively, what will dictate the dynamics should the PBoC not allow for a deep enough adjustment:

An accurate picture of the scale of capital outflows along with new growth trend is crucial to understanding the extent of CNY depreciation needed and/or the sustainability of the market interventions/controls. Indeed, if policy makers are serious about having a marketdetermined exchange rate regime, the size of the real exchange rate adjustment will be enough at a point when capital outflows are largely financed by current account inflows or stable components of the capital account (FDI and portfolio outflows). On the flip side, if policy makers take a step back from the recent moves towards flexibility, increase their market interventions and implement controls then the scale of capital outflows and the new growth trend will determine the sustainability of such measures.


China’s slowdown coupled with the country’s economic transition to a consumption and services led model has decreased the extent to which outflows can be covered by current account surpluses:

Financing for capital outflows had been relatively straightforward when China was running very large current account surpluses. CA transactions fell below 8% in mid 2011 and have stayed low (around 5% of GDP including trade mis-invoicing) despite the increase in capital outflows.Weak global demand and competitiveness pressures as well as a push to rebalance growth away from exports to consumption have eroded the current account surplus in recent years.

And then there’s the infamous RMB carry trade, discussed in these pages on countless occasions:

China was able to offset capital outflows by increased borrowing from abroad, with total external debt standing at around USD1trn from different sources. We believe this borrowing captures a portion of the China carry trade – borrowing in USDs short term to fund RMB assets by onshore borrowers (corporates, banks and non bank financial entities). This increased borrowing was large enough such that China was able to not only compensate for outflows but also to accumulate reserves during the period of 2011-2014. Both FDI inflows and portfolio flows are now smaller than international borrowings. Absent these inflows, China would have been running down reserves for the last few years. Most of this recent financing has come from the increase in cross border borrowing by the Chinese private sector. We estimate that these flows have soaked up close to 30% of capital outflows over the last 5 years from practically 0% in 2008. Additionally, that these flows are short term in nature, denominated mainly in USDs and channelled to financial services and real estate sectors, adds to worries about their sustainability. About 75% of the current stock of roughly USD1.4trn of cross-border borrowing by the Chinese private borrowers has a maturity of less than one year. 


Finally, here’s the “downside scenario”:

According to our measures, non-FDI capital outflows are 8-10% of GDP and the financing that may be available through the current account is 5-6% (inclusive of the trade mis-invoicing). The gap between the two is about 3-4% of GDP. This is assuming that outflows don’t further accelerate from current levels. Greater flexibility in the exchange rate will help reduce the China carry trade and increase the repayment of international borrowings. Short-term debt as a percentage of GDP is running higher than historical averages at 4% of GDP and may decline from the current 10% of GDP. This means an additional outflow of about 5% of GDP. 


Net FDI and portfolio flows currently add up to 2.5% of GDP, but these may dry up or reverse in the event of a serious enough growth shock. Flat net FDI and a reversal of portfolio flows similar to what happened in 2007 implies an outflow of 2% of GDP.


The above numbers suggest that in such a downside scenario there could be pressure on the central bank to provide about 10-12% of GDP in reserves to the market to offset outflows as well as hedging demand (which could be met by intervening in forward markets). This is roughly USD1.0-1.2trn – that would be about 30% of its current reserve portfolio. 



And the punchline is this: “There would be a liquidity tightening onshore as these reserves are sold … which implies the central bank needs to provide a 500bp cut in the RRR to keep liquidity conditions.”

This is nothing new and indeed we’ve discussed it exhaustively, but it’s worth reiterating why it’s so important. Clearly, a 500 bps cut to a policy rate amounts to massive easing. Of course massive easing is usually associated with a weaker currency. In short, China’s efforts to offset the devaluation pressure on the yuan necessitate outsized policy rate cuts that only serve to… exert more pressure on the currency.

As we’ve noted previously, if China ends up liquidating $1.2 trillion in reserves, that would (in a vacuum) offset more than 60% of QE3 and, based on the extant literature, put somewhere on the order of 200 bps of upward pressure on 10Y yields

There are obviously any number of mitigating factors here, not the least of which is that it now appears the Fed is destined to trigger flights to safety no matter what it does, which could mean that USTs catch a bid from investors fleeing the sheer lunacy of central bankers but then again, when dovish leans by central bankers no longer boost risk assets we have a very serious problem, which means that in the end, if the market is banking on jittery investors’ collective safe haven bid to fill the void left by China’s UST liquidation, then it is effectively saying that the only thing that can save the world from China’s massive reverse QE is the complete loss of central banker credibility.



The huge Maquarie bank has just stated on the weekend that “helicopter money” is just 12 months away:


(courtesy Maquarie bank/zero hedge)

It Begins: Australia’s Largest Investment Bank Just Said “Helicopter Money” Is 12-18 Months Away


Just over two years ago, when the world was deciding who would be Bernanke Fed Chair replacement, Larry Summers or Janet Yellen (how ironic that Larry Summers did not get the nod just because a bunch of progressive economists thought he would not be dovish enough) we wrote about a different problem: with the end of QE3 upcoming and with the inevitable failure of the economy to reignite (again), we warned that there remains one option after (when not if) QE fails to stimulate growth: helicopter money.

While QE may be ending, it certainly does not mean that the Fed is halting its effort to “boost” the economy. In fact… the end of QE may well be simply a redirection, whereby the broken monetary pathway, one which uses banks as intermediaries to stimulate inflation (supposedly a failure according to the economist mainstream), i.e., “second-round effects”, is bypassed entirely and replaced with Plan Z, aka “Helicopter Money” mentioned previously as an all too real monetary policy option by none other than Milton Friedman and one Ben Bernanke. This is also known as the nuclear option.

Today, one day after the Fed according to some finally lost its credibility, none other than Australia’s largest investment bank, Macquarie, just made the case that helicopter money is not only coming, but has a “very high” probability of commencing its monetary paradrops over the next 12-18 months.

Time for a policy U-turn? Back to the future: British Leyland


From conventional QEs to more unorthodox policies…


As discussed (here and here), we do not believe that investors are likely to benefit from acceleration in growth rates, trade or liquidity and indeed on the contrary, negative feedback loops from EMs to DMs imply that neither would be able to support global growth. Secular stagnation is the key explanatory variable (here). The deflationary pressures from overleveraging, overcapacity and technology shifts can be either allowed to work through economies or public sector needs to continue resisting via expansionary policies.


Since ’08, monetary policies were doing most of the lifting with limited participation by fiscal authorities (bar China). In other words, in the absence of either private or public sectors driving higher velocity of money, it was CBs that were supplying incremental liquidity to preclude contraction of nominal GDP and avoid stronger deflationary pressures. However, marginal utility of incremental injections has been declining (witness much lower impact of recent ECB’s QE and increase in BoJ accommodation since Dec ’14).


Part of the reason for monetary stimulus fading is that supply of US$ remains low. Global economy continues to reside on a de-facto US$ standard and current incremental supply is almost non-existent (depending on definition growing at +2%/-1% clip vs. average since ‘01 of ~15%). In other words, due to lack of recovery in the US velocity of money and lack of QEs, global economy is not getting enough US$ to continue leveraging.


…as efficacy of conventional monetary QE is questioned


At the same time efficacy of continuing with conventional QE policies is being challenged and not just by independent observes but also ‘insiders’ (such as recent SF Fed paper). As velocity of money globally continues to fall, conventional QEs have to become exponentially larger, as marginal benefit declines. If public sector is not prepared to step aside, what other measures can be introduced to support nominal GDP and avoid deflation?


There are several policies that could be and probably would be considered over the next 12-18 months. If private sector lacks confidence and visibility to raise velocity of money, then (arguably) public sector could. In other words, instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.


British Leyland failed, but it might work at least for a while


British Leyland (formed from nationalized British car companies in the late ’60s) destroyed its automotive industry but for a time it provided employment and investment. CBs directly monetizing Government spending and funding projects would do the same. Whilst ultimately it would lead to stagflation (UK, 70s) or deflation (China, today), it could provide strong initial boost to generate impression of recovery and sustainable business cycle.It could also significantly shift global terms of trade (to the benefit of commodity producers) and cause a period of underperformance by our ‘Quality & Stability’ portfolio and improve performance of ‘Anti-Quality’ screen. What is probability of the above policy shift? Low over next six months; very high over the longer term.

What’s most disturbing about the above assessment is that Macquarie realizes this last ditch attempt to preserve the status quo will fail, but will – if nothing else – buy another 12-18 months.

So is that the event horizon countdown: 1-2 years… and then?

And just like last week’s Daiwa report broke the seal onunprecedented economic bearishness (Citi promptly made a global recession its 2016 base case) will the Macquarie report become the benchmark which the other penguins will ape as suddenly calls to bypass the banks become the norm and suddenly every “authority” on the topic, which so vehemently advocated for QE, admits it never worked from day one, and instead recommends that the only option left to save the world is the “nuclear” one?

Which, incidentally, is precisely what we said would be theendgame on March 18, 2009 – the day the Fed announced the full-blown first QE1.








David Stockman, eloquently comments that we will head into the next recession with no dry powder to fight the depression.  This is a must read for all…




(courtesy David Stockman/Contra Corner Blog)


“Blood In The Casino Like Never Before” – Riding ZIRP Into Monetary Central Planning’s Dead End

Submitted by David Stockman via Contra Corner blog,

What the Fed really decided Thursday was to ride the zero-bound right smack into the next recession.When that calamity happens not too many months from now, the 28-year experiment in monetary central planning inaugurated by a desperate Alan Greenspan after Black Monday in October 1987 will come to an abrupt and merciful halt.

Why? Because Keynesian money printing is in a doom loop. The Fed’s ZIRP policies guarantee another financial crash, which will trigger still another outbreak of panic in the C-suites of corporate America and a consequent liquidation of excess inventories and labor on main street. That’s the new channel of monetary policy transmission, and it eventually leads to recession.

This upcoming recession, in turn, will prove beyond a shadow of doubt that in today’s financialized global economy you can’t manage the GDP of a single country as if it were isolated in an economic bathtub surrounded by high walls; nor can you attain domestic macro-targets for employment and inflation through the blunderbuss instruments of pegged money market rates and wealth effects levitation of the stock market.

Instead, the Fed’s falsification of financial asset prices simply subsidizes gambling in secondary markets; enables daisy chains of collateral to be endlessly hypothecated and re-hypothecated; causes vast misallocations and malinvestments of corporate resources, especially stock buybacks and other financial engineering; and sends money managers scrambling for yield without regard to risk, such as in junk bonds and EM debt.

What it doesn’t do is get households all jiggy, causing them to boost their leverage and spend up a storm. That’s because they reached “peak debt” at the time of the financial crisis, and have been struggling to reduce debt ever since. In the most recent quarter, in fact, household debt posted at $13.6 trillion or 3% lower than in early 2008.

Stated differently, the household credit channel of monetary policy transmission was a one-time Keynesian parlor trick that is now over and done. All of the Fed’s vast emissions of central bank credit have pooled up in the canyons of Wall Street, and have not triggered a borrow and spend binge on main street.

Yellen’s post-meeting statement more or less conceded the point that the US economic bathtub is vulnerable to ill winds from abroad and that six years of “extraordinary” money printing and ZIRP have not succeeded in filling it to the brim. After reviewing a domestic economy that is purportedly in the pink of health (“Since the Committee met in July, the pace of job gains has been solid, the unemployment rate has declined, and overall labor market conditions have continued to improve.”), she was quick to introduce the skunk in the woodpile:

The recovery from the Great Recession has advanced sufficiently far, and domestic spending appears sufficiently robust, that an argument can be made for a rise in interest rates at this time. We discussed this possibility at our meeting. However, in light of the heightened uncertainties abroad and a slightly softer expected path for inflation, the Committee judged it appropriate to wait for more evidence, including some further improvement in the labor market, to bolster its confidence that inflation will rise to 2 percent in the medium term.

That’s right. They are waiting for moar inflation in the face of a gale force deflation blowing in from China and its food chain of EM materials and components suppliers. Yet as we pointed out in conjunction with the tiny 0.2% year over year change in the August CPI, waiting for the overall index to hit 2.0% is a fool’s mission because the latter is currently a meaningless average of hot and cold.

But now you have a clean bifurcation in the price indices that proves the utter pointlessness of so-called inflation targeting. One the one hand, virtually everything which is directly priced and traded on world markets is carrying a negative sign on a year-over-year basis.


That includes gasoline, which is down 23.3% since last August; fuel oil, which is lower by 34.6%; and gas and electric utilities, which are down by 11.5% and 0.5%, respectively.


Likewise, all other commodities are lower by 0.5%, while goods prices were materially lower than a year ago nearly without exception. For example, women’s apparel prices were down by 2.1%, window and floor coverings by 4.9%, appliances by 3.5%, household equipment and furnishings by 3.1%, furniture and bedding by 0.9% and tools and supplies by 0.3%


At the same time, the balance of the BLS table tells the Fed’s covey of inflation doves to shut-up and sit down. By any practical reckoning, upwards of two-thirds of living costs for average households are accounted for by shelter, transportation, medical care, education, entertainment and the like. Yet the year-over-year price change for the first three of these items was 3.1%, 2.1% and 2.2% respectively, while the cost of going to restaurants was up 2.7% and education costs (not shown) were up by 3.5%.


Nor are these one-year gains for the principal domestic services categories some kind of recent aberration that will lapse back into sub-2% inflation land if the Fed does not keep interest rates pinned to the zero bound. In fact, the 2.6% gain since last August for all services less energy services, as shown above, is spot on a trend that has been extant for the entirety of this century to date.


…it does not take a PhD in economics to figure out that the resulting “average” rate of price change for the BLS’ dubious market basket of consumer items is purely a statistical accident, and absolutely outside of the Fed’s ability to shape.

I was obviously wrong about the Fed’s capacity to see the obvious. The posse of PhDs domiciled in the Eccles Building opted to keep shoveling free money into the Wall Street casino when not only is the above data self-evident, but it is exactly this bifurcation of the index components, not the weakness of the US economy, that has been holding down the overall consumer price index for the last three years.

Indeed, ever since the China/EM commodity boom peaked in mid-2012 and the central bank driven global credit boom began to decelerate, the world price of commodities and manufactured goods has been falling. Needless to say, that trend thoroughly and effortlessly penetrated the imaginary wall of the US economic bathtub with which the FOMC is so wrong-headedly preoccupied.

Since then, CPI energy prices have fallen at a 5.2% annual rate and durable goods at a 1.2% CAGR, while domestic services less energy services have risen at a 2.5% annual rate. When you net all the puts and takes you get an overall CPI change of 1.1% annually for the past 36 months.

Bifurcated CPI Indices


Are these paint-by-the-numbers Keynesian fools incapable of even elementary pattern recognition? Worse still, why are they confident that the tide of global deflation has run its course, and that it will soon fade after three years of the above?

Inflation has continued to run below our 2 percent objective, partly reflecting declines in energy and import prices. My colleagues and I continue to expect that the effects of these factors on inflation will be transitory. However, the recent additional decline in oil prices and the further appreciation of the dollar mean that it will take a bit more time for these effects to fully dissipate……As these temporary effects fade….we expect inflation to move gradually back toward our 2 percent objective.

That is not only a faith-based statement of monetary policy; it’s totally implausible as an empirical matter. It took nearly two decades for the global credit inflation to each its apogee in 2012-2014. Now the payback phase of this unprecedented crack-up boom will take years to unfold.

This means that when the FOMC surveys the “incoming data” in October and December and for months thereafter, it will see rising evidence of domestic weakness, domestic consumer inflation printing at a bifurcated sub-2% level and the Fed’s favorite new indicator, the Goldman Sachs financial conditions index (GSFCI), pointing to ever “tighter” financial conditions.

Indeed, as the stock average continue to roll-over while the dollar gains and credit spreads blow-out, you can count on a repeat of Yellen’s thinly disguised reference to the spurious statistical contraption that B-Dud invented while serving as Goldman’s chief economist:

Developments since our July meeting, including the drop in equity prices, the further appreciation of the dollar, and a widening in risk spreads, have tightened overall financial conditions to some extent. These developments may restrain U.S. economic activity somewhat and are likely to put further downward pressure on inflation in the near term.

Needless to say, Vice-Chairman Bill Dudley’s preposterous argument that the Fed does not need to stench the flow of free money to the Wall Street casino because the market has “self-tightened” may well convince a majority of the FOMC to keep deferring the date of “lift-off”. But it will no longer cause the robo-traders to buy-the-dips.

What happened after the Thursday decision announcement is that the in-grained six-year algorithms failed. In response to Fed meeting statements in the future, therefore, the bots will be increasingly programmed to sell the resulting FOMC confusion and incoherence, not buy the dips.

So there will also be blood in the casino like never before. Once the Fed is exposed as flat-out paralyzed, rent with public disagreements and out of dry powder, the gamblers and 1 percenters will not only desperately dump their “risk assets” in the mother of all meltdowns; they will also come to detest and loath the FOMC—-thereby setting the stage for show trials on Capitol Hill where the Keynesian posse responsible for fueling Wall Street’s stupendous gambling spree will hopefully feel the wrath of the nation’s awakened sleepwalkers and their currently clueless representatives.

Indeed, if you don’t think the financial markets are headed for a big spot of trouble, please click-on to Janet Yellen’s press conference. Yes, it’s painful to listen to and even worse to watch, but the exercise will make one thing abundantly clear. Namely, that the most powerful economic agent in the world is naïve, superficial, paint-by-the-numbers Keynesian bathtub plumber who has no clue about the incendiary forces that the Fed and other central banks have unleashed in the global financial system.

Among the most insidious of these is that the corporate C-suite has been morphed into a stock trading room. The mountains of cheap corporate debt that have been sold to yield hungry asset managers has enabled companies to literally rig their own stock prices higher and higher via $2.5 trillion of buybacks since March 2009. At the same time, the Fed’s wealth effects policy and free money to the carry trades has fulsomely rewarded buy the dips robo-machines and hedge fund gamblers, thereby insuring that the cash register keeps ringing on executive stock options.

Accordingly, corporate management of labor and inventory is now tethered to the stock averages, and that has especially perverse effects as the Fed’s financial bubble cycle ages. To wit, the C-suite becomes inordinately bullish and complacent as the stock averages move ever higher and executives’ net worth soars.

But when the financial bubble eventually bursts owing to unexpected “black swans” or the fact that the last sucker in the casino has hit the bid, the C-suite is caught short and lapses into panicked cost cutting and retrenchment. The evidence from the Great Recession cycle could not be more dispositive.

As shown in the chart below, the official dating for the recession incepted in December 2007, but total business inventories (manufacturing, wholesale and retail) kept building through a peak in August 2008, when they reached $1.54 trillion. Then came the stock market carnage of September through March, which elicited a violent liquidation of inventories.


In fact, during the next 13 months inventory investment plunged by $230 billion or nearly 15%, causing a cascading curtailment of current orders and production throughout the US supply chain. Only after the stock market put in a convincing bottom in March-August 2009 did the liquidation come to a halt, and the process of reinvestment begin.

Stated differently, the Obama $800 billion fiscal stimulus had virtually nothing to do with the turnaround depicted in the chart because only small amounts of its had actually hit the spending stream by August 2009.

Likewise, the violent shedding of labor occurred after the stock market collapse, not when the recession commenced. Specifically, during the eight months between December 2007 and August 2008, the rate of job loss was about 150,000 per month. Then during the next eight months it accelerated to 675,000 per month.


Similar to the case of inventories, however, the convincing rebound of the stock market after April 2009 brought the jobs contraction to an abrupt end. While the total non-farm payroll count did not hit bottom for another 10 months, the rate of job loss shrunk to less than 200,000 per month.

Needless to say, the C-suite channel of monetary policy transmission has not attained even the slight notice of the monetary politburo. Indeed, these retro-Keynesians are so manically focussed on the “labor market” that they can see almost nothing else.

But what they ought to be noticing is that US business sales have already rolled over, and the inventory to sales ratio is rising rapidly, just as it did in 2008 before the Lehman collapse.

In short, the US economy does not resemble in the slightest the labor market focussed picture painted by Yellen on Thursday. It is at a point of extreme vulnerability late in the business cycle in the context of a 20-year global credit boom that is now dramatically reversing.

Except this time when the stock market bubble collapses, there will be no ZIRP and QE to ride to the rescue and rekindle bullish greed in the C-suites. Instead, this time there will be a real, prolonged recession as the excesses and deformations from two decades of the Keynesian con game conducted from the Eccles Building are wrung out of the financial markets.

At the end of the day, cowardice and intellectual incoherence do not will out. By opting for the 81st month of ZIRP, the foolish usurpers of free market capitalism and its vital processes of price discovery who currently rein from the Eccles Building have lashed themselves to a doom loop.

It will eventually mean the end of monetary central planning, but not until tens of millions of innocent main street savers, workers and entrepreneurs have been unfairly and unnecessarily battered by its demise. Yellen and Co should be so lucky as to only face torches and pitch forks.





Key points:

  1.  Fed is caught in domestic issues. They must raise rates or they bankrupt pension funds
  2.  Internationally if they raise rates, they cause emerging markets to default as massive amounts of dollars leave their country. They have no way of paying off their debt denominated in USA dollars.
  3. By avoiding to increase their interest rate, they have been spending more.
  4. They will lose control as they will be forced to raise interest rates only when they see asset inflation.  They will lose control over their economy.

(courtesy Martin Armstrong)



Martin Armstrong Warns “Hell Is About To Break Loose”

Submitted by Martin Armstrong via,

Yellen has inherited a complete nightmare. 



Thursday’s decision to delay yet again the long-awaited liftoff from zero interest rates is illustrating that the world economy is totally screwed.

There is a lot of speculation about why the Fed seems so reluctant to “normalize monetary policy”.There are of course the typical domestic issues that there is low inflation, weak wage gains in the face of strong job growth, a hike will increase the Federal deficit and then there is the argument that corporations that now have $12.5 trillion in debt. All that is nice, but with corporate debt, our clients are locking in long-term at these levels, not funding anything short-term. Those clients who have listened are preparing for what is to come unlike government which has been forced to shorten the average duration of their debts blind to what happens when rates rise, which will be set in motion by the markets – not Yellen.

The Fed is really caught between a rock and a very dark place. Yes, they have the IMF and the world pleading with them not to raise rates for it will hurt other debtors who borrowed excessively using dollars to save money.
The Fed is also caught between domestic policy objectives that dictate they MUST raise rates of they will bankrupt countless pension funds and international where emerging markets will go into default because commodities have collapsed and they have no way of paying off this debt that has risen to about 50% of the US national debt.
By avoiding the normalization of interest rates (hikes), the Fed has encouraged government to spend far more than they realize because money is cheap. This will eventually light the fire under the economy helping to fuel the Sovereign Debt Crisis. There appears to be no hope for the Fed and they will be forced to raise rates only when they see asset inflation in equities. Then they will have no choice.
This is the worst possible mess and the longer they have waited to normalize interest rates, the worst the total crisis is becoming for they will have zero control over the economy and once that is seen, holy Hell will break loose.



And now the voice behind the Fed:Goldman Sachs;


(courtesy zero hedge)

Goldman Calls It: No Rate Hike Until Mid-2016

Several days before Thursday’s FOMC meeting, we asked rhetorically whether “Yellen is about to shock everyone“, and lo and behold: everyone was quite “shocked” when instead of a hawkish hold or a dovish hike, Yellen proceeded with the loosest possible decision: keeping ZIRP indefinitely, crushing both the Fed’s credibility and its market “communication” strategy in the process, and sending the market tumbling. That said, not everyone was shocked – as we also reported one bank made the explicit case not only for no rate hike but for further easing – as first reported here last weekend, “Goldman said The “Fed Should Think About Easing.”

This is what we added last weekend:

What one should most certainly pay attention to, however, is what Goldman says the Fed will do – you know, for “risk management” purposes – because as we have shown countless times in the past, Goldman runs the Fed.


As such, forget a September rate hike. Or perhaps Yellen will listen too carefully to Hatzius and instead of a rate hike, shock absolutely everyone, and instead of a rate hike the Fed will join the ECB, SNB and Riksbank in the twilight zone of negative rates. That, or QE4.


And why not: after both the Swiss National Bank and the Chinese central bank crushed investors who thought the banks would never surprise them, why should the Fed not complete the 2015 trifecta of central bank turmoil? After all, the money printers are already running on “faith” and credibility fumes. Might as well go out with a bang.

Not only is this precisely what happened (yes, the Fed gave its first ever NIRP hint ever) but more importantly, we got the latest confirmation that when it comes to policy, anything that Goldman wants, Goldman gets courtesy of a few clueless lifetime academics in charge of the US money printer.

With that out of the way, the only question that remains is not what will the Fed do, but what Goldman tells the Fed to do in 2015, or rather in 2016, because according to Jan Hatzius’ latest note, one can forget about a hike in October or December, and instead focus on 2016, or rather the summer of 2016.

For the answer, we go straight to Goldman which in a rhetorical Q&A wonders “What were the most important things you learned from this week’s FOMC meeting?” to which the answer is “Mostly, the FOMC confirmed what we already knew.”

Well, duh, the Fed merely read the script Goldman bad prepared – of course what the Fed confirmed what Goldman already knew. Although to keep appearances, even Hatzius had to pretend he was surprised:

That said, there were some surprises at the margin. The statement was even more dovish than we expected, especially with respect to global growth. And while both the committee’s economic projections and the median funds rate path were in line with our forecasts, several members—possibly including Chair Yellen—seem to have reduced the projected speed of hikes in 2016 from 100 basis points (bp) to 75bp. But overall, we think the basic message is intact, and the surprises at this meeting were much smaller than back in June, when we shifted our liftoff call from September to December.

Uh, as a reminder, Goldman said “the Fed should think about easing.” How on earth can it be surprised by a “more dovish Fed”, but yes, yes, we get that admission the Fed is controlled by Goldman destroys the narrative there are these “tinfoil conspiracy websites” who should be ignored because they allege just that.

In any event, here is Goldman’s explanation when it would consider greenlighting a Fed rate hike:

Q: Is October on the table?


A: Not really. We believe that Chair Yellen’s baseline since the June meeting has been a December liftoff, and it would be very unnatural for her to pull forward given the information received in the meantime. Besides, there is only one  round of monthly economic data on the calendar before then. Last but not least, the logistics are daunting. There will not be a fresh SEP, and the committee would need to announce an impromptu press conference in the October 29 FOMC statement announcing the rate hike itself; an earlier addition of a press conference to the calendar does not work because this would lead the market to conclude that the FOMC has decided to hike, without any room for explanation at that point. This all seems too sudden and dramatic for a Committee that, we think, would like the first hike to be as unexciting as possible.


Q: What could shift the liftoff into 2016?


A: Although we expect the conditions for liftoff regarding employment, inflation, and financial conditions to be in place by December, there is some risk of disappointment in each of them. Missing on any one of them would call December into question, missing on more than one would almost certainly shift liftoff into 2016. Regarding growth and employment, the data looked quite solid until recently but the early information for September has been weak so far. As shown in Exhibit 1, the average of the New York Empire State and Philly Fed index in September fell to the lowest level since the 2011 recession scare, and consumer sentiment also weakened significantly. These are all volatile indicators that could bounce back quickly, but we would put at least a bit of weight on the possibility that they indicate a larger-than-expected drag from the recent tightening in financial conditions and the weakness in global growth.


Finally, regarding financial conditions, our baseline expectation is an easing but the uncertainty is significant as always. And at least so far, the response of the financial markets to the FOMC—especially the sharp selloff in the stock market—has probably disappointed the committee’s expectations.

The punchline: Goldman no longer wants a 2015 rate hike, in fact any rate hike if it ever comes, will be in the summer of 2016:

Q: What is your own view of the appropriate liftoff date? 


A: Our own answer to that question has long been 2016. In fact, our own view is similar to that of Chicago Fed President Charles Evans, who recently shifted his call from early 2016 to mid-2016. Although it is definitely possible to rationalize a December 2015 liftoff using various forms of the Taylor rule, there are two good reasons to delay the move longer. First, the risk of hiking too early is bigger than the risk of hiking too late when inflation is so far below target and we have spent so much time stuck at the zero bound. Second, we have seen a sizeable tightening of financial conditions. At this point, our “GSFCI Taylor rule” suggests that the FOMC should be trying to ease rather than tighten financial conditions. Our own view in terms of optimal policy is quite strongly in favor of waiting well into 2016.

And there you have it: no rate hike until mid-2016, which as we said previously, means no rate hike at all since the “apolitical” Fed will never hike just before a presidential election, and more importantly, by then the epic inventory liquidation-driven recession will have already started, making the only question that matters in the summer of 2016: NIRP or QE4. Everything else is noise.

Steen Jakobsen, Saxobank’s chief investment officer states that:
1.the Fed is a joke
2. If the Fed is targeting China and the emerging markets what is going to change in the next year as both are deflating.
thus the Fed will continue at ZIRP and maybe head into NIRP:
(courtesy Steen Jakobsen/SaxoBank/zero hedge)

The Fed’s A “Joke,” Saxobank CIO Prefers Gold Amid Increased Uncertainty

“A joke” and “far from impressive”, both descriptions give you a sense of the frustration being felt by Saxo Bank’s Chief Economist Steen Jakobsen who analyses the decision not to raise rates in this brief clip. The Fed “missed opportunity to raise rates for first time since 2006” according to Steen who has been consistently arguing against what he calls the Fed’s  “pretend-and-extend” culture. Volatility anduncertainty will remain high and there’s now little chance of a rate rise this year suggests Steen (expecting a big rally in gold), given that EM economies and China are unlikely to emerge from the doldrums in the near-term.


The last minute gets dark…

“…as always with The Fed is clearly shying away from taking any hard decisions, from actually taking any accountability ort responsibility for resetting the clock on this extremely easy monetary policy… they are just as likely to cut as to hike.”




 The very large sovereign wealth fund 1MDB cannot pay what is owing on its 11 billion USA debt.  Much of that debt was funded by Goldman Sachs on 3 private placements.  Malaysia is another country that has huge USA debts and huge current account and fiscal deficits.  These guys are running neck and neck with Brazil, Turkey, and South Africa to see who will default first…


(courtesy zero hedge)

FBI Opens Investigation Into Malaysian PM’s Goldman-Financed Slush Fund

On Friday, Malaysian authorities arrested Khairuddin Abu Hassan. According to WSJ, the charges were “attempting to undermine democracy.”

What Khairuddin – a former member of Malaysia’s ruling party – was actually “attempting” to do, was travel to New York and urge US authorities to investigate 1MDB, the infamous Goldman-backed development bank turned slush fund that’s become the subject of intense scrutiny after allegations that some $700 million was diverted to Prime Minister Najib Razak’s personal account surfaced earlier this year. Those allegations, along with the perception that Najib’s government has sought to stimy attempts to investigate the bank, have led to calls for the premier’s ouster and were the catalyst for street protests that swept through Kuala Lumpur last month.

For those who need a refresher on the backstory, here’s how we explained it last month:

1MDB was set up by Najib six years ago and has been the subject of intense scrutiny for borrowing $11 billion to fund questionable acquisitions. $6.5 billion of that debt came from three bond deals underwritten by Goldman, whose Southeast Asia chairman Tim Leissner is married to hip hop mogul Russell Simmons’ ex-wife Kimora Lee who, in turn, is good friends with Najib’s controversial wife Rosmah Manso.

You really cannot make this stuff up.


What Goldman did, apparently, is arrange for three private placements, one for $3 billion and two for $1.75 billion each back in 2013 and 2012, respectively. Goldman bought the bonds for its own book at 90 cents on the dollar with plans to sell them later at a profit (more here from FT). Somewhere in all of this, $700 million allegedly landed in Najib’s bank account and the going theory is that 1MDB is simply a slush fund. 

The plot only thickens from there, and as we detailed in “Abu Dhabi Can’t Find $1.4 Billion It Supposedly Received From Malaysia PM’s Slush Fund,” when UAE went looking for a $1.4 billion payment Abu Dhabi’s International Petroleum Investment Co. supposedly received in exchange for guaranteeing some $3.5 billion in 1MDB bonds, the money was nowhere to be found, casting considerable doubt on IPIC’s manager who was fired earlier this year. Incidentally, IPIC was also involved in a rather nefarious looking deal in which one of its subsidiaries guaranteed $2.3 billion in 1MDB mystery money that may or may not be parked in the Cayman Islands in order to secure a sign-off from Deloitte after KPMG was dismissed as 1MDB’s auditor for asking too many questions.

Since then, another $993 million has turned up missing at IPIC and it’s certainly starting to look like the rabbit hole goes pretty deep on this one. Ultimately, the future of Najib’s political career will likely depend on how it all shakes out.

Unfortunately for the Prime Minister, it looks as though arresting Khairuddin Abu Hassan on his way to New York was too little too late because now, WSJ is reporting that the FBI has opened an investigation into the development fund. Here’s more:

The FBI has opened an investigation into allegations of money-laundering related to a Malaysian state investment fund, a person familiar with the matter said.


The scope of the investigation wasn’t known. It is the latest in a series of international investigations related to the fund that have been revealed in the past several weeks.


The international investigations center on entities related to 1Malaysia Development Bhd., which was set up by Prime Minister Najib Razak in 2009 to help drive the economy. The fund is having difficulty repaying more than $11 billion of debt and is at the center of investigations that are destabilizing the government.


Late Friday, a former member of Malaysia’s ruling party who had raised questions about money transfers to the Malaysian prime minister was arrested on charges of attempting to undermine democracy, his lawyer Matthias Chang said.



The arrest of Khairuddin Abu Hassan, who remained in custody on Saturday, prevented him from traveling to New York where he planned to urge U.S. authorities to investigate the transfers, Mr. Chang said.


A spokeswoman for the FBI’s New York office said that no agent in the office had arranged to speak with Mr. Khairuddin or had any previous contact with him.


Two of the transfers were made through the Singapore branch of a Swiss private bank and routed via Wells Fargo & Co. Wells Fargo declined to comment.

We’ll close with our assessment from earlier this month as it’s still the best way to sum up the situation as it stands today: The more information the public gets about corruption at 1MDB, the louder will be the calls for Najib’s head (figuratively speaking we hope), and the larger will be the street protests. Throw in the fact that the loudest calls for Najib’s exit come from former Prime Minister Mahathir Mohamad and it seems like a very good bet that the political (not to mention social) upheaval in Malaysia is just getting started and that is precisely what the country does not need as it desperately tries to hang on to its stash of hard fought FX reserves in the face of a plunging currency and looming financial crisis.  



Assad pounds ISIS over the weekend as Russia sends in fighter jets.

Check to Obama


(courtesy zero hedge)

Clock Ticks On US Syria Strategy As Assad Pounds ISIS Targets, Russia Sends Fighter Jets

Earlier this week, Bashar al-Assad served notice to ISIS that the tide may have just turned in the battle for Syria. The Kremlin’s move to increase its “logistical” and “technical” support for government forces at Latakia appears to have breathed new life into the regime which carried out a series of air raids in the de facto ISIS capital Raqqa on Thursday. 

This came amid reports that Assad’s forces were using new “highly effective and very accurate” weaponry. “There are modern weapons that the regime didn’t previously have, be they rocket launchers or air to ground to missiles,” The Syrian Observatory for Human Rightstold Reuters.

Needless to say, Russia’s move to bolster Assad and the suggestion by Syrian foreign minister Walid al-Moualem that Damascus may soon formally request Russian ground troops for the fight has alarmed Washington which, until now, was content to bide its time until Assad finally fell before swooping in to “liberate” the country from whatever militia managed to prevail. As we outlined on Friday, that option is now officially off the table, as toppling Assad will now mean ISIS, al-Nusra, YPG, and the various and sundry other groups operating throughout the country will need to first defeat Russia, an exceptionally unlikely outcome and one that the Pentagon certainly cannot afford to wait out. With its back against the wall in terms of explaining to the public why it seems more and more like the US would rather allow ISIS to continue to operate rather than ally with Russia and Assad to defeat them, Obama and Kerry folded on Friday,instructing Defense Secretary Ashton Carter to phone his Russian counterpart to begin coordinating anti-terror activities in Syria. Here’s The New York Times:

As the first Russian combat aircraft arrived in Syria, the Obama administration reached out to Moscow on Friday to try to coordinate actions in the war zone and avoid an accidental escalation of one of the world’s most volatile conflicts.


The White House seemed to acknowledge that the Kremlin had effectively changed the calculus in Syria in a way that would not be soon reversed despite vigorous American objections. The decision to start talks also reflected a hope that Russia might yet be drawn into a more constructive role in resolving the four-year-old civil war.


At Mr. Obama’s instruction, Defense Secretary Ashton B. Carter on Friday opened a dialogue on Syria with his Russian counterpart, Defense Minister Sergei K. Shoigu, aimed at making sure that American and Russian forces avoid running into each other by mistake. 


“The Russians are going into Syria because the regime’s position in the north is deteriorating,” he noted. “The Pentagon has been unable to recruit and train a viable opposition to fight the Islamic State because the rebels’ main interest is in fighting Mr. Assad. Given divisions between Moscow and Washington, it’s hard to see how you turn convergence on tactical military issues into a collective and viable political strategy to stabilize Syria and end the war.”


But that appears to be precisely Mr. Kerry’s goal. “They allege that they also share the goal of a political transition that leads to a stable, whole, united, secular Syria,” Mr. Kerry said of the Russians on Britain’s Channel 4. “The question always remains, Where is Assad’s place and role within that? And that’s what we need to have more conversation on.”

Note that this is a bitter defeat for Washington. Moscow, realizing that instead of undertaking an earnest effort to fight terror in Syria, the US had simply adopted a containment strategy for ISIS while holding the group up to the public as the boogeyman par excellence, publicly invited Washington to join Russia in a once-and-for-all push to wipe Islamic State from the face of the earth. Of course The Kremlin knew the US wanted no such thing until Assad was gone, but by extending the invitation, Putin had literally called Washington’s bluff, forcing The White House to either admit that this isn’t about ISIS at all, or else join Russia in fighting them.

The genius of that move is that if Washington does indeed coordinate its efforts to fight ISIS with Moscow, the US will be fighting to stabilize the very regime it sought to oust.

In other words: checkmate, courtesy of The Kremlin.

And while Washington scrambles to decide its next move, Assad was back on offense Friday, launching what observers said were the heaviest air strikes yet on ISIS targets near the ancient city of Palmyra. Here’s BBC:

About 25 air strikes left at least 26 people dead, including 12 militants, the UK-based Syrian Observatory for Human Rights said.


IS captured Palmyra, which includes a Unesco World Heritage site, in May.


Elsewhere, air strikes on Idlib killed 17 people, the Observatory said.


The city of Idlib is a stronghold of an alliance of jihadist and Islamist groups calling itself the Army of Conquest.



Syrian military sources quoted by Reuters have said Syria is using new types of very accurate weapons supplied by its ally, Russia.


The latest air strikes came a day after Syrian air force jets attacked Raqqa, the de facto capital of IS.


“In the past two days, the regime has intensified its air raids against areas controlled by the Islamic State group,” Observatory spokesman Rami Abdel Rahman said.

And from Al Arabiya:

Syrian warplanes unleashed a wave of deadly airstrikes on the militant-held town of Palmyra in central Syria on Friday, killing at least 15 and wounding many more, activists said, in some of the heaviest bombardment since the extremist group seized the ancient town May 10.


The Palmyra airstrikes come a day after the Syrian army carried out heavy air raids in the northern city of Raqqa, also held by the Islamic State of Iraq and Syria  group (ISIS).


A local activist who spoke on condition of anonymity for security reasons reported at least 30 air raids on Palmyra Friday. A local media collective called the strikes a “massacre” and said 15 people were killed and more than 120 wounded. It said Palmyra’s only hospital was suffering severe shortages in staff and equipment, and some of the wounded had to be taken to Raqqa, more than 200 kilometers (125 miles) away.

In short, the Assad regime appears to have gone from depleted and exhausted, to “massacring” rebel fighters in the space of just two weeks, a remarkable turnaround which certainly seems to suggest that if the US doesn’t figure out a strategy soon, the whole thing could be over and Assad restored.

Incidentally, Hezbollah claims to have beaten back a rebel advance in Foua on Friday. Here’s Al Arabiya again:

Meanwhile, a coalition of rebel groups launched a major ground offensive on two predominantly Shiite villages in the northern province of Idlib, firing dozens of rockets and detonating at least seven booby-trapped vehicles on their outskirts.


The coalition, known as Jaysh al-Fateh, or “Army of Conquest,” attacked Foua and Kfarya villages earlier Friday. Both are held by pro-government forces in an otherwise rebel-controlled province.


Syrian TV and Manar, a station owned by Lebanon’s Hezbollah group, said popular defense forces – a term used to refer to Shiite militias – foiled attempts by “terrorists” to attack Foua and destroyed five armored vehicles. Hezbollah fighters are also fighting to defend the two villages.

Bear in mind that the main reason for Israeli Prime Minister Benjamin Netanyahu’s visit to Moscow on Monday is to prevent Russia’s presence in Syria from strengthening Hezbollah.

Meanwhile, behind the scenes, the man some suspect of masterminding the entire effort to restore the Assad regime, Quds commander Major General Qassem Soleimani, seems to understand the US strategy all too well – we close with the following from Iran’s PressTV:

Commander of the Quds Force of the Islamic Revolution Guards Corps (IRGC) Major General Qassem Soleimani said Wednesday that the policy of the US with regards to Daesh and other Takfiri groups operating in the region is to only have them under control and not eliminate them.


USA folds!! The timetable to remove Assad is now completely unknown and there goes the Qatar-through Syria pipeline (bypassing completely Russia)
(courtesy zero hedge)

US Syria Strategy Officially Unravels: Kerry Admits Timetable For Assad Exit Is Completely Unknown

On Saturday we brought you the latest from Syria where the Assad regime’s rejuvenated forces carried out aggressive air raids on ISIS positions for a second consecutive day on Friday, striking targets in Idlib and Palmyra, the UNESCO heritage site that fell to Islamic State in May.

The latest round of bombing came just 24 hours after regime planes hit the de facto ISIS capital at Raqqa, and served notice not only to the multifarious anti-government fighters operating in Syria, but also to the US, Turkey, Qatar, and Saudi Arabia, that Russia’s stepped up logistical and technical support is already paying dividends.

The arrival of four Sukhoi “Flanker” jets and presence of eight Russian military helicopters further underscored the extent to which Moscow is now preparing to play a pivotal combat role and by Friday, Washington was left with little choice but to put Defense Secretary Ashton Carter on the phone with his Russian counterpart. Here’s how we described the situation currently facing the US:

Moscow, realizing that instead of undertaking an earnest effort to fight terror in Syria, the US had simply adopted a containment strategy for ISIS while holding the group up to the public as the boogeyman par excellence, publicly invited Washington to join Russia in a once-and-for-all push to wipe Islamic State from the face of the earth. Of course The Kremlin knew the US wanted no such thing until Assad was gone, but by extending the invitation, Putin had literally called Washington’s bluff, forcing The White House to either admit that this isn’t about ISIS at all, or else join Russia in fighting them. The genius of that move is that if Washington does indeed coordinate its efforts to fight ISIS with Moscow, the US will be fighting to stabilize the very regime it sought to oust. 

The game, as they say, is officially up for Washington. Toppling Assad will now mean ISIS, al-Nusra, YPG, and the various and sundry other groups operating throughout the country will need to first defeat Russia, an exceptionally unlikely outcome and one that the Pentagon certainly cannot afford to wait out.

All that’s left now is for Washington to try and save face by negotiating for some manner of deal that removes Assad from power, but even that now looks less than likely. Speaking from London on Saturday, John Kerry attempted to hang on to the “Assad must go” narrative, but in what might fairly be described as the most conciliatory language yet, Washington’s top diplomat essentially admitted that the timetable for Assad’s exit is now completely indeterminate. Here’s Reuters:

Speaking after talks with British Foreign Secretary Philip Hammond in London, Kerry called on Russia and Iran to use their influence over Assad to convince him to negotiate a political transition.


Kerry said the United States welcomed Russia’s involvement in tackling the Islamic State in Syria but a worsening refugee crisis underscored the need to find a compromise that could also lead to political change in the country.


“We need to get to the negotiation. That is what we’re looking for and we hope Russia and Iran, and any other countries with influence, will help to bring about that, because that’s what is preventing this crisis from ending,” said Kerry.



“For the last year and a half we have said Assad has to go, but how long and what the modality is …that’s a decision that has to be made in the context of the Geneva process and negotiation.”


Kerry added: “It doesn’t have to be on day one or month one … there is a process by which all the parties have to come together and reach an understanding of how this can best be achieved.”

Note that this a far, far cry from the hardline rhetoric the US was still clinging to just months ago and it marks a tacit recognition of what should have been obvious from the very beginning. That is, the US backed effort to assist Qatar and the Saudis in destabilizing the Assad regime was doomed from the start.

In retrospect, the idea was ludicrous to the point that one wonders how it’s possible that US intelligence officials ever seriously considered it. The notion that Washington and its regional allies could effectively engineer a popular rebellion in Syria by providing support to a multitude of ragtag Sunni extremist groups without plunging the country headlong into chaos is laughable.

The Assad regime is a pillar (if not the pillar) of Iran’s efforts to expand its regional influence and Syria serves as a critical link between Tehran and Hezbollah. Quds Force and its spymaster general Qassem Soleimani have supported the Assad regime both financially and militarily for years and that support hasn’t and probably will never will wane. “I don’t think the Iranians are calculating this in terms of dollars. They regard the loss of Assad as an existential threat,” a Mid-East security official told The New Yorker in 2013. “Suleimani told us the Iranians would do whatever was necessary, he said ‘We’re not like the Americans. We don’t abandon our friends’”, an Iraqi politician added. And here is Assad last week: “The relationship between Syria and Iran is an old one. It is over three-and-a-half decades old. There is an alliance based on a great degree of trust. That’s why we believe that the Iranian role is important.”

And let’s not forget that the flip side to the now well-known Qatar-Turkey natural gas pipeline (i.e. the pipeline that would have served to undercut Gazprom’s stranglehold over Europe’s energy needs and that Assad refused to sign off on, triggering the all-out effort to destabilize his regime) is the Islamic Pipeline which, you’ll note on the map below, goes from Iran through Iraq (where Suleimani’s influence is legendary both in government and militarily through the various Shiite militias battling ISIS) to Syria and, conveniently, through Lebanon which works out very nicely for Hezbollah. 

What Putin’s role ultimately would be in the Iran-Iraq-Syria line isn’t entirely clear but the project would compete with the Southern Gas Corridor, which is obviously good for Russia and it seems likely that in one way or another, Moscow, via its influence in Tehran and Damscus, would end up benefiting. Indeed, the fact that Assad signed an MOU for the Islamic Pipeline shortly after citing Gazprom’s interests in rejecting the Qatar-Turkey line certainly seems to suggest that Russia had already negotiated for a piece of the pie. As a refresher, recall the following from The Guardian ca. 2013:

In 2009 – the same year former French foreign minister Dumas alleges the British began planning operations in Syria – Assad refused to sign a proposed agreement with Qatar that would run a pipeline from the latter’s North field, contiguous with Iran’s South Pars field, through Saudi Arabia, Jordan, Syria and on to Turkey, with a view to supply European markets – albeit crucially bypassing Russia. Assad’s rationale was “to protect the interests of [his] Russian ally, which is Europe’s top supplier of natural gas.”


Instead, the following year, Assad pursued negotiations for an alternative $10 billion pipeline plan with Iran, across Iraq to Syria, that would also potentially allow Iran to supply gas to Europe from its South Pars field shared with Qatar. The Memorandum of Understanding (MoU) for the project was signed in July 2012 – just as Syria’s civil war was spreading to Damascus and Aleppo – and earlier this year Iraq signed a framework agreement for construction of the gas pipelines. 


The Iran-Iraq-Syria pipeline plan was a “direct slap in the face” to Qatar’s plans. No wonder Saudi Prince Bandar bin Sultan, in a failed attempt to bribe Russia to switch sides, told President Vladmir Putin that “whatever regime comes after” Assad, it will be “completely” in Saudi Arabia’s hands and will “not sign any agreement allowing any Gulf country to transport its gas across Syria to Europe and compete with Russian gas exports”, according to diplomatic sources. When Putin refused, the Prince vowed military action.

With all of that in mind, it’s incomprehensible that the US ever believed its strategy in Syria had a chance of succeeding. Washington and Riyadh were attempting to simultaneously subvert Tehran’s regional ambitions, tip the Sunni/Shiite divide in favor of Sunni extremists against the Quds even as the US literally attempted to do the exact opposite in neighboring Iraq, and jeopardize Russia’s energy leverage over Europe at a time when that leverage was key to Russia’s bargaining position over Ukraine. To call that a fool’s errand is to be exceptionally generous.

So now, with the US strategy in tatters, Syria’s fate will be decided essentially without Washington’s input. Consider the following from Al-Monitor:

High-level talks are due to take place on Sept. 21 between Iran and Russia to discuss Iran’s “four-point plan” for Syria. A senior Iranian official who spoke on condition of anonymity told Al-Monitor that while the details of the plan were still a work in progress, the first stage aimed to contain and deplete IS, with the second stage focused on reaching consensus over the type of government in control of Damascus and Assad’s future role.

In other words, while President Rouhani keeps Obama and Kerry busy with the Mickey Mouse Iran Nuclear Deal, the Ayatollah and Soleimani will be hard at work with Putin and Assad designing Syria’s future.

And finally, lest we should forget that this entire debacle has created a refugee crisis of historic proportions, we leave you with the following quote from John Kerry, who once again refuses to acknowledge that while Bashar al-Assad may not be the most benevolent leader history as ever known, and while regime forces have certainly contributed to human suffering on a massive scale (see Yarmouk), the bottom line is that Syrians are not running from Assad, they are running from the civil war that the US and its allies helped to engineer:

John Kerry: “I just know that the people of Syria have already spoken with their feet. They’re leaving Syria.”

Russian embassy hit by fire.  Netanyahu in Moscow worried about arms flowing to Hezballah
(courtesy zero hedge)

Kremlin Calls For “Action” After Russian Embassy In Syria Hit By Mortar Fire

On Sunday we highlighted comments from Secretary of State John Kerry which seemed to indicate that Washington’s strategy is Syria may have officially unraveled. Speaking in London on Saturday, Kerry said the following:

“For the last year and a half we have said Assad has to go, but how long and what the modality is …that’s a decision that has to be made in the context of the Geneva process and negotiation.It doesn’t have to be on day one or month one … there is a process by which all the parties have to come together and reach an understanding of how this can best be achieved.” 

That, we said, “might fairly be described as the most conciliatory language yet,” as it relates to Washington’s vision for Syria’s political future.

We also noted that it now appears as though Russia and Iran will end up determining Assad’s fate which, if you know anything about Tehran’s relationship with Assad and about regional powerbrokers, should not come as a surprise. Indeed, the surprise is that the US, Saudi Arabia, and Qatar ever thought the effort to oust Assad had any chance of going smoothly in the first place.

On Monday, the Syria news flow continues unabated.

Israeli Prime Minister Benjamin Netanyahu made his planned trip to Moscow to discuss how Russian and Israeli forces can avoid an “accidental” confrontation in the skies above Syria. That’s the headline anyway. Of course Netanyahu’s primary concern here is that sophisticated Russian weaponry will find its way into the hands of Hezbollah. Here’s Reuters:

A rapid Russian build-up in Syria, which regional sources have said includes warplanes and anti-aircraft systems, worries Israel, whose jets have on occasion bombed the neighboring Arab country to foil suspected handovers of advanced arms to Assad’s Lebanese guerrilla allies Hezbollah.



Israel is also concerned that top-of-the-line Russian military hardware now being deployed could benefit Hezbollah and one day be turned against the Jewish state.


“Our policy is to do everything to stop weapons from being sent to Hezbollah,” Netanyahu said.

Note that this is not some far-fetched scenario. In fact, it’s more likely than not that arms will ultimately be funneled to Hezbollah if not directly by the Russians or Assad, then almost certainly by the Quds Force whose presence in Syria is seen as a “rumor” in the mainstream media even as it’s so well known in regional intelligence circles as to be considered par for the proverbial course. And make no mistake, Netanyahu is also well aware of the fact that Tehran is effectively angling to make Russia a de facto member of its existing axis of power that includes Syria and Lebanon and will ultimately include Iraq given Iran’s control of the Shiite militias and heavy influence in Baghdad political circles:

The Netanyahu ex-adviser said Israel worried that Russia’s reinforcement of Assad in the conflict, now in its fifth year, could effectively create an axis between its long-standing enemies, Hezbollah and Iran, and Moscow.

And speaking of Russian arms, here’s what US officials have confirmed is in Syria as of now: 28 combat aircraft including 12 Su-25s, 12 Su-24s & 4 Flankers (Su-27s or Su-30s), up to 20 helicopters split of Mi-24 Hind attack & Mi-15 Hip transport copters, and up to 9 tanks.

Meanwhile, the Pentagon also says Russia has begun drone flights (via Reuters):

Russia has started flying drone aircraft on surveillance missions in Syria, two U.S. officials said on Monday, in what appeared to be Moscow’s first military air operations inside the country since staging a rapid buildup at a Syrian air base.

Finally, with all of the above in mind, we close with the following rather ominous bit from Tass and a tweet from AFP which seems to portend imminent escalation:

The Russian embassy in Damascus has come under mortar fire, the Russian Foreign Ministry said Monday.

The ministry said Moscow condemns the “criminal attack” on the Russian diplomatic mission.


“At 09:00 a.m. on September 20, a mortar shell hit the territory of the Russian embassy in Damascus. The shell was driven deep into the earth and made no damage,” the ministry said. “We condemn the criminal attack on the Russian diplomatic representation in Damascus.”


A well written commentary showing the plight of Brazil.
The sovereign has USA debt of 300 billion and on top of that: the state owned oil giant Petrobras 90 billion.  The total debt of Petrobras is 134 billion equivalent USA dollars. The sovereign’s fiscal deficit is 9% of GDP and thus the huge debt denominated in dollars is a huge concern as it can never be repaid.
(courtesy Shock Exchange)

Rousseff Coup Could Sink Brazil, Emerging Markets

Submitted by Shock Exchange

Rousseff Coup Could Sink Brazil, Emerging Markets

Brazil’s President Dilma Rousseff’s approval rating has plummeted to 8% amid the country’s worst recession in two decades. Her job is at risk too. Earlier this week opponents filed a petition to impeach Rousseff due to allegations of corruption by former president Luiz Inacio Lula da Silva at oil giant Petrobras of nearly $2 billion:

This week opponents of Ms Rousseff, incensed by allegations that “pixulecos” mostly involving ruling coalition politicians have cost Petrobras at least R$6bn (US$1.5bn), took their campaign to congress by filing a petition for impeachment with the speaker of the lower house Eduardo Cunha … The petition from Mr [Helio] Bicudo, which was backed by the opposition in congress, marks the start of what could be a long process to try to topple the former Marxist guerrilla only nine months into her second four-year term.

Rousseff – hand-picked by Lula da Silva to succeed him – appears to be caught up in da Silva’s backdraft. Opposition parties also claim she violated Brazil’s fiscal responsibility law when she doctored government accountsto allow more public spending prior to the October election last year. Rousseff in turn described the attempt to use Brazil’s economic crisis as an opportunity to seize power amodern day coup.

Inopportune Time For A Coup

Petrobras In Dire Straits

Political turmoil could not have come at a worst time. The Petrobras debacle has been a point of contention for the populace. While the elite profited from bribes and kickbacks at the state-owned oil giant, Petrobras is laying off workers and cutting supplier contracts in order to stem cash burn.

And those efforts may still not be enough to stave off bankruptcy. With $134 billion in debt – $90 billion of it dollar-denominated – Petrobras is the world’s most-indebted oil company. With oil prices 60% below their Q2 2014 peak, Petrobras will likely crumble under its debt load.

Budget Requires All Hands On Deck

Brazil’s fiscal picture is not much better. The economy contracted nearly 2% in Q2 and the Brazilian real has depreciated against the U.S. dollar by nearly 40% over the past year. That said, the country will find it difficult to grow revenues amid declining commodities prices. Including interest payments, the country’s budget deficitwas projected to grow to 8%-9% of GDP, prompting S&P to downgrade the Brazil to junk status:


Source: The Economist

Brazil finance minister, Joaquin Levy, immediately did an about face; Levy put forth an austerity plan that suggested a R$65 billion mix of cuts and tax increases could generate a 0.7 percent surplus in 2016. The revival of the CPMF tax on financial transactions is expected to raise about R$32 billion, while healthcare, agriculture subsidies, low-income housing programs and infrastructure are expected to bear the brunt of the cost cuts.

The market reacted positively to the austerity plan – the Brazilian real rallied briefly after it was announced. However, Rousseff will need political capital to get the austerity plan approved by congress and supported by the populace. Any delays could prompt Fitch and Moody’s to also downgrade Brazil to junk status. An impeachment of Rousseff would probably cause all three rating agencies to move; such act would surely cause more capital flight and pressure the currency further.


Why Brazil Matters

Brazil is a country of interest due to its bellwether status for emerging markets and its $300 billion in dollar-denominated debt.

If Brazil goes, other emerging markets could also get hit. A free fall in the Brazilian real could trigger defaults if dollar-denominated debt becomes too burdensome for Petrobras and others. Such defaults could leak into global bond funds, trigger margin calls or derivatives defaults for counterparties. According to hedge fund giant Bridgewater Associates, the impact is considered unknowable, which could cause a selloff in global markets until the risk is contained. Investors should avoid Brazil and the U.S. stock market due to the risk of a coup or protracted impeachment process.






and then we have this study by the Economic collapse is within spitting distance:





Economic Collapse Full Frontal: The Brazil Case Study

To be sure, emerging markets are for the most part an across-the-board trainwreck right now, as a confluence of factors including still-depressed Chinese demand, sluggish global growth and trade, depressed commodity prices, and a looming (supposedly) Fed hike have conspired to push emerging economies from LatAm to AsiaPac to the brink.

That’s no secret and neither is the fact that Brazil was long expected to be the epicenter of any future EM crisis just as it was, in many ways, the picture of EM success during better times.

Having said all of that, the extent to which everything that could go wrong for Brazil did go wrong for Brazil is truly something to behold. Indeed, even we’ve been surprised with the pace at which the situation has deteriorated and in the wake of the S&P downgrade the market is now left to ponder just how much worse things can get and also whether somehow, the embattled government can manage to get its fiscal house in order before the whole thing falls apart completely. On that note, we present the following assessment from Goldman which pretty much sums up the myriad obstacles that lie ahead:

We expect the economy to continue to face headwinds from:

  • the ongoing fiscal and quasi-fiscal adjustment
  • higher interest rates
  • increasingly exigent credit conditions
  • rapidly weakening labor market
  • higher levels of inventory in key industrial sectors
  • higher public tariffs and taxes
  • high levels of household indebtedness
  • weak external demand
  • soft commodity prices
  • political uncertainty
  • extremely depressed consumer and business confidence. 

Oh, is that all?

On the bright side, the BRL’s harrowing decline and an outright lack of demand may ironically serve to limit the downside:

On the positive side, a more competitive exchange rate and weak domestic demand conditions should gradually lift the contribution of net exports to growth and provide a floor for the expected contraction of real GDP in 2015.



Meanwhile, the political turmoil surrounding calls for President Dilma Rousseff’s impeachment and the ongoing “Carwash” investigations continue to cast a pall over attempts to right the ship. Here’s the latest courtesy of Bloomberg:

  • Session to discuss President Rousseff’s vetoes on measures that may increase govt spending is expected to take place tomorrow;
    • Govt says initiatives approved by Congress earlier this year may represent ~BRL6b/yr in additional spending over the next 4 years, undermining fiscal austerity efforts
    • Fresh defeat in Congress would also underscore Rousseff’s political fragility
    • Breach of 3.91 last week opens way for BRL to test all- time low at 4.004 if BZ budget is hit by Congress decision
  • Rousseff’s allies suggesting she may delay announcement of ministry reform, also expected this week, to avoid extra friction with other parties whose posts may be cut; gives Congress further chances to override vetoes
    • Reform seen more as cosmetic by mkt participants, as no significant impact in expenses expected; Chief of Staff Aloizio Mercadante’s exit would be only signal with potential positive impact, local trader says
  • Veja reports Lower House President Cunha will analyze the 13 impeachment requests filed so far at pace of 3 per week, beginning with the ones with weaker legal grounds
    • Impeachment request submitted by PT party co-founder Helio Bicudo and former Justice Minister Miguel Reale, which is considered the strongest, expected to be analyzed at end of Oct. or beginning of Nov.
    • PSDB leaders see need to let Rousseff “bleed” longer in her post, according to Veja; it may be more interesting for opposition and PMDB to attempt to force Rousseff to address most unpopular measures first before advancing with impeachment talks, local trader says
  • Brazil police carry out 11 court orders in new Carwash phase
    • Brazil’s Engevix Executive Arrested in New Carwash Phase: Estado

Finally, Brazil’s former Treasury Secretary (who’s now chief economist at Banco Safra) described recent actions by the central bank has reflective of “crisis mode.” Via Bloomberg:

  • Treasury announcing it will buy back 1m NTN-F at auction today is an attempt to ease pressures over DI rates, Carlos Kawall, chief economist at Banco Safra, says by phone.
  • Move is similar to BCB auctions of FX credit lines and swaps for rollovers; such actions are done in “crisis mode,” not to fix structural problems, but to avoid idea that BZ mkt is out of control
  • BZ also could reduce offerings of fixed rates bonds, former Treasury Sec. Kawall says
  • BCB could even sell reserves when political scenario becomes less uncertain than it appears now
  • BRL nearing record lows is dangerous for inflation; FX pass- through for prices, while still limited, may increase
  • Recent pressures that led BRL to near 4.00/USD and Jan 21 DI to pass 16% attributed to uncertainties over risk of Rousseff being impeached and fears that Congress could increase public spending

Summing up…



The Greek election:  Syriza wins but New democrats come close. Neo Nazi party also does well with the huge unemployment.
(courtesy zero hedge)

Greece Votes: Syriza Wins But Neo-Nazis Top Among The Unemployed

Update: New Democracy concedes to Syriza, following elections where following a 45% abstention rate, Tsipras is set to hold 145 seats in parliament.


Three months ago, when Greece held a dramatic referendum on the conditions of the country’s third bailout program, the world couldn’t get enough. Whether right or wrong, investors had come to believe that the fate of the financial universe hinged on the outcome of Greece’s fraught negotiations with creditors and despite the fact that the financial fallout from a potential Grexit had long since been thrust onto the shoulders of EMU taxpayers and away from the private sector, the market came to believe that a black swan event was just around the corner.

Fast forward to Sunday and Greeks are going to the polls again, only this time, no one seems to care. For those interested, we’ve included the full election preview below, but essentially what it comes down to is this:

The Syriza vision that resonated so well with voters in January has, in the space of just nine months, been relegated to the realm of “wishful thinking” and even if Tsipras wins, this is not the Tsipras who swept to power earlier this year and this version of Syriza has been watered down in the wake of the split which saw Panagiotis Lafazanis form his own, breakaway party last month. 


In short, the IMF, Berlin, and Brussels got what they wanted – even if the fight was perhaps more difficult than they had imagined.Democracy has been undermined in Greece by the purse string and although Europe’s methods were more subtle than say, Turkey’s, the outcome is the same: a democratic election result that was seen as undesirable by those who ultimately control Europe was nullified and the will of the Greek people has been subverted.


Now, Greeks find themselves going to the polls facing a situation that will be familiar to many American voters – a choice between two parties that claim to be diametrically opposed, but who are actually all too similar.

And so against that rather depressing backdrop, exit polls show that Tsipras will likely prevail:


Here’s the full breakdown from Bloomberg:

  • Alexis Tsipras’s Syriza party to get between 30.0% and 34.0% of the vote in Greek parliamentary elections, a joint exit poll commissioned by Greece’s TV channels shows.
  • Conservative New Democracy party, led by Evangelos Meimarakis, to get between 28.5% and 32.5%
  • Far right Golden Dawn to get between 6.5% and 8.0%
  • Center-left Pasok to get between 5.5% and 7.0%
  • Communist Party of Greece to get between 5.5% and 7%
  • Centrist River party to get between 4.0% and 5.5%
  • Independent Greeks, junior coalition partner in Tsipras’s last govt, to get between 3.0% and 4.0%
  • Anti-bailout Popular Unity, which split from Syriza, to get between 2.5% and 3.5%
  • Union of Centrists to get between 3.2% and 4.2%
  • NOTE: Threshold for electing lawmakers in parliament is 3% of the vote; total votes of parties which don’t make it to parliament proportionately distributed to parties which elect lawmakers; winner of the election takes 50 seats bonus in country’s 300 seat chamber;

For what comes next, see the full preview below, but before closing it’s worth noting that incredibly, neo-Nazi Golden Dawn came in third place and garnered the most support among the country’s unemployed masses:

*  *  *



Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/Monday morning

Euro/USA 1.1269 down .0031

USA/JAPAN YEN 120.48 up .515

GBP/USA 1.5523 up .0004

USA/CAN 1.3195 down .0030

Early this Monday morning in Europe, the Euro fell by 31 basis points, trading now well above the 1.12 level rising to 1.1269; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece and the Ukraine, rising peripheral bond yields, and flash crashes.  Last night the Chinese yuan raised in value . The USA/CNY rate at closing last night:  6.3692, (weakened)

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen now trades in a southbound trajectory  as settled up again in Japan up by 52 basis points and trading now well above the all important  120 level to 120.48 yen to the dollar and thus providing the necessary ramp for all bourses to rise.

The pound was up this morning by 4 basis points as it now trades just above the 1.55 level at 1.5523.

The Canadian dollar reversed course by rising 30 basis points to 1.3195 to the dollar. (Harper called an election for Oct 19)


We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially  with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade (blowing up)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).(blew up)

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this Monday morning: closed

Trading from Europe and Asia:
1. Europe stocks mostly in the green,except Germany

2/ Asian bourses mixed   … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai green (massive bubble ready to burst), Australia in the red: /Nikkei (Japan)closed/India’s Sensex in the red/

Gold very early morning trading: $1134.00


Early Monday morning USA 10 year bond yield: 2.16% !!! up 3 in basis points from Thursday night and it is trading just above resistance at 2.27-2.32%.  The 30 yr bond yield rises to  2.95 up 2 in basis points.

USA dollar index early Monday morning: 95.42 up 18 cents from Friday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Monday morning
And now for your closing numbers for Monday night:
Closing Portuguese 10 year bond yield: 2.58% up 7 in basis points from Friday
Japanese 10 year bond yield: .314% !! 0  basis points from Friday but extremely low
Your closing Spanish 10 year government bond, Monday,up 6 in basis points.
Spanish 10 year bond yield: 2.00% !!!!!!
Your Monday closing Italian 10 year bond yield: 1.81% up 5  in basis points from Monday: trading 19 basis point lower than Spain.
Closing currency crosses for MONDAY night/USA dollar index/USA 10 yr bond:  3:00 pm
 Euro/USA: 1.1196 down .0102 (Euro down 102 basis points)
USA/Japan: 120.48 up 0.329 (Yen up 54 basis points)
Great Britain/USA: 1.5506 down .0013 (Pound down 13 basis points
USA/Canada: 1.3239 up .0014 (Canadian dollar down 14 basis points)

USA/Chinese Yuan:  6.3675  up .0050  (Chinese yuan down/on shore)

This afternoon, the Euro fell by 102 basis points to trade at 1.1196. The Yen fell to 120.48 for a loss of 54 basis points. The pound was down 13 basis points, trading at 1.5506. The Canadian dollar fell 14 basis points to 1.3239. The USA/Yuan closed at 6.3675/up.0050
Your closing 10 yr USA bond yield: up 6 basis points from Friday at 2.20%// ( trading below the resistance level of 2.27-2.32%).
USA 30 yr bond yield: 3.02 up 8 in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
 Your closing USA dollar index: 95.96 up 64 cents on the day .
European and Dow Jones stock index closes:
England FTSE up 4.60 points or 0.08%
Paris CAC up 49.65 points or 1.09%
German Dax up 32.35 points or 0.33%
Spain’s Ibex up 9.60 points or 0.10%
Italian FTSE-MIB up 240.52 or 1.12%
The Dow up 125.61 or 0.77%
Nasdaq; down 0.94 or 0.02%
OIL: WTI:  $46.59    and  Brent:  $48.53
Closing USA/Russian rouble cross: 66.03  up 46/100 roubles per dollar on the day
And now for your more important USA stories.
Your closing numbers from New York

Bonds Baumgartner’d As Bullard Bounce Bruised By Hillary Bursting Biotech Bubble

Stocks love the smell of Bullard in the morning…


And then Hillary struck… the pretty Biotechs


China opened weaker but was rescued…


But US Futures show the moves better than cash today… As Bullard’s chatter (because FF futures didn’t budge) talked stocks up before Hillary spoiled the party…


Which left cash indices swinging around…Small Caps closed red on the day as Nasda was rescued from red…


Post-FOMC, Gold and The Long Bond remain bid, stocks lower…


As Hillary crushed Biotech hopes and dreams…


This was The Biotech ETF’s biggest plunge since April 2014 (testing the 200DMA – $74.47)…


The other stock story was AAPL (and TSLA) as iCar chatter picked up (for 2019)…


Treasury yields were smashed higher… as volatility remains extreme


Credit markets did not get the message…


And remain in deep red warning territory…


Bonds & Stocks decoupled with USDJPY running the show…


The US Dollar was well bid today from the open in Europe to the close in Europe (sold during Asia and flat after Europe closed)…


Gold slipped modestly on the day (notably less than the USD would imply) with Silver and Copper flat…


As Crude erupted again (supposedly on OPEC comments of $80 oil by 2020)…



And Texas’ other famous produce is tumbling…


Charts: Bloomberg

Bonus Chart: Is Hillary just following Bill’s lead?

Late Friday night we learn that the TED spreads are rising.  The Ted spread is simply the 3 month rate that banks lend to each other divided by the 3 month treasury bill rate.  A rise means that banks are loathe to lend to each other.  The rise in TED spreads were last seen in 2008 when the banks were in severe trouble.
(courtesy zero hedge)

Interbank Credit Risk Soars To 3 Year Highs – Is This Why Janet Folded?

Last week we warned of the ominously rising risks evident under the surface in US financials. Following Yellen’s decision to chicken-out yesterday, it appears interbank counterparty risk is even ominous-er. With bank stocks prices tumbling, catching down to credit market’s concerns, the TED Spread – implicitly measuring interbank credit risk – jumped over 21% yesterday – to its highest in 3 years.


Is this the real reason The Fed did not hike?


and now financial stocks tumble back to credit reality…


The question is – is this the tail that is wagging the Fed’s dog? Given the Fed’s ownership structure, any rise in the banks’ cost of financing, in an era of surging counterparty risks may be the straw that break the “confidence camel’s” back. Just see Nigeria.

If so – then we have a problem – The Fed’s dovish inaction is not helping alleviate any concerns.


Charts: Bloomberg





Our favourite bellwether: Caterpillar.  Their sales have declined now for 33 consecutive months.  This is even greater than a depression:


(courtesy zero hedge/source)

What On Earth Is Going On With Caterpillar Sales?

We have been covering the ongoing collapse in global manufacturing as tracked by Caterpillar retail sales for so long that there is nothing much to add.

Below we show the latest monthly data from CAT which is once again in negative territory across the board, but more importantly, the global headline retail drop (down another 11% in August) has been contracting for 33 consecutive months! This is not a recession; in fact the nearly 3 year constant contraction – the longest negative stretch in company history – is beyond what most economists would deem a depression.

Perhaps CAT should come up with a new economic term to describe the true state of global manufacturing.



Following is what Bridgewater’s Ray Dalio knows as to how bad the economy really is behaving and thus the real reason that the Fed cannot raise rates:



(courtesy zero hedge)




“What Does The Fed Know That We Don’t” – Bridgewater’s Ray Dalio Answers

In the aftermath of last week’s FOMC “dovish hold” disappointment, it is not only the Fed that has seen its credibility crushed; so have plain-vanilla tenured economists and Wall Street strategists. Recall that it was on August 13, one month before last week’s FOMC meeting, when 82% of economists said the Fed would hike in September.


Post-mortem: more than four out of five economisseds were, as always, wrong. Hardly surprising: after all, when voodoo art pretends to be science, this is precisely the outcome one gets.

But while there is no surprise in everyone being wrong (because quite simply nobody realized that the only thing is what Goldman wants), one question remains: “what does the Fed know that we don’t.”

Of course, one has to clarify what “we” means, because Zero Hedge readers know precisely what the Fed knows – it knows that a recession is coming if not already here, as we won’t tire of showing week after week.

Here are some examples of what the Fed (if less than 20% of economists) “knows“:

1) Business Inventories-to-Sales are at recesssion-inducing levels…


1a) Sidenote 1 – Wholesale Inventories relative to sales have NEVER been higher


1b) Sidenote 2 – here is why that is a problem

2) Industrial Production is rolling over into recession territory


2a) Sidenote – as Empire Fed confirmed this morning for August – inventories are collapsing (and along with that Q3 GDP)


3) Retail Sales is not supportive of anything but a looming recession…


And finally,

4) The last 6 times Auto Assemblies collapsed at this rate, the US was in recession…


* * *

But for those who are unable to form an independent though and would rather ignore reality unwinding before their eyes, instead demanding an “authoritative” voice to crush their cognitive bias, here is Ray Dalio, head of the world’s biggest hedge fund Bridgewater, who explains what the recent 4% drop of his All Weatherrisk-parity fund means.

This is what he said: “different risk parity managers structure their portfolios somewhat differently to achieve balance, so we can’t comment on them all. But we can show you how this wealth effect has worked by showing you how our diversified portfolio mix (which simply represents a well-diversified portfolio of assets) would have led economic growth, which is shown in the below two charts, one of which goes back to 1950 and the other which goes back to 1915. These charts show how the excess returns (the returns of the portfolio over the return of the cash interest rate) led economic growth relative to potential (i.e., estimated economic capacity)… If a well-diversified mix of assets underperforms cash, there will be a negative wealth effect and negative incentives to invest in economic activity, which will be bad for the economy. The Federal Reserve and other central banks would be well-served to pay attention to this relationship to make sure that this doesn’t happen for long and/or happen too severely. The chart speaks for itself.

The chart in question:

And just in case it “does not speak for itself“, here is Ice Farm Capital’s Michael Green explaining what is says: “The recent weak performance of All Weather would suggest global growth six months from now will be running nearly 2% below its already reduced potential.

In other words, while the rest of the levered-beta 2 and 20 chasers formerly known as “hedge funds” recently accused risk parity of blowing up their August returns(September is not shaping up much better) the biggest risk-parity fund in the world also found a scapegoat: the global economy, which according to Dalio, is the reason for All Weather’s dramatic August slump.

But while blaming the amorphous economy is a rather weak argument, Dalio already has a far more tangible scapegoat ready: the Fed itself, who as the Bridgewater letter cautions “would be well-served to pay attention” to the hedge fund’s sudden P&L drop. Because as Dalio goes, so goes the economy.

For now, however, the message is far simpler: absent far more easing, what the charts above signal is that the US economy is about to slam head-on into an economic recession… or rather depression, one which some would add, is only inevitable due to some 40 years of Fed easing starting with Greenspan’s great moderation, and continuing through three sequential credit-fuelled bubbles which merely delayed the inevitable “mean reversion” moment


The Fed’s cheerleader slams CNBC’s cheerleader:  Jim Cramer for buying stocks.  Bullard states that the Fed cannot support stocks forever!!
(courtesy CNBC/Bullard)

Bullard Slams “Unsavory” Jim Cramer’s “Permanent Cheerleading,” Admits “Fed Can’t Support Stocks Forever”

When The Fed’s own cheerleader-in-chief (see October 2014) slams you for cheerleading, you know it’s gone too far. In a stunning 30 second clip on CNBC this morning, St.Louis Fed head Jim Bullard sent a message to “your friend Cramer”, saying “The Fed cannot permanently raise stock prices,” adding, rather astonishingly to the anchors, “to have [Cramer] cheerleading for lower rates 24 hours a day is unsavory.”


Apologies for sound quality…


We assume Cramer will rebut this statement later in the day by exclaiming “they know nothing!!”

More indicators showing the USA economy is faltering:  existing home sales plunges the most in 7 months:
(courtesy zero hedge)

Housing “Brightspot” Burns Out – Existing Home Sales Plunge Most In 7 Months

After an almost incessant rise since January, Existing Home Sales in August plunged 4.8% (the most since January and dramatically worse than the -1.65 drop expected). This is the 3rd biggest monthly collapse since the financial crisis. While the Northeast saw no change, The West (down 7.8% MoM) and South (down 6.6% MoM) saw the biggest plunges in sales as median home prices fell for the 2nd month in a row. It appears the one brightspot in the economy (according to mainstream media) has burned out as affordability and excitability come to a turning point.

An ugly month for sales… (must be the weather)


And the YoY rise in prices is slowing…


Lawrence Yun, NAR chief economist, says home sales in August lost some momentum to close out the summer. “Sales activity was down in many parts of the country last month — especially in the South and West — as the persistent summer theme of tight inventory levels likely deterred some buyers,” he said.

But, always eager to find a silver lining, no matter what the data says,

“The good news for the housing market is that price appreciation the last two months has started to moderate from the unhealthier rate of growth seen earlier this year.”

Charts: Bloomberg

Volkswagen’s potential fine is 18 billion USA or 20 x larger than GM’s faulty ignition scandal.  The faulty ignition is responsible for 174 deaths.  It is amazing that USA authorities are whacking German companies like Deutsche bank and Volkswagen and yet this sovereign cannot get its gold back stored at he FRBNY:
(courtesy zero hedge)

Bailout World: Volkswagen “Cheating” Fine Is 20 Times Higher Than GM’s For ‘Killing 174 People’

When bailout-darling GM ‘fessed up to an intentional ignition-switch defect, tied to at least 174 deaths, The Justice Department fined them $900 million (and no employees faced criminal charges). So, in this consequence-less world in which we live, when Volkswagen admits to literally cheatingemissions-standards tests, it faces up to $18 billion in fines from The EPA, one has to wonder whether “we” have our priorities right?


VW shares have been monkey-hammered this morning after the “cheating” scandal was exposed…


As The Washington Post reports,

For hiding a fatal ignition-switch defect tied to at least 174 deaths, General Motors employees will face no criminal charges and the automaker will pay a $900 million fine — less than a third of its $2.8 billion in profit last year.


The settlement with the Department of Justice, announced Thursday, signals a close to the criminal investigation that has long tarnished the car giant. But critics say the automaker got off easy for mishandling one of the worst auto safety crises in history, and years of lying to safety regulators and leaving Americans at risk.


“I have a saying about GM: There’s no problem too big that money can’t solve,” said Clarence Ditlow, executive director of the Center for Auto Safety. GM “is buying [its] way out of a criminal prosecution.”

GM’s penalty is also less than the record-setting $1.2 billion fine levied on Toyota last yearafter the Japanese car giant failed to recall cars that could suddenly accelerate, even though federal regulators say the defect has been linked to at least five deaths.

So, as The Telegraph reports, VW could face huge fines if it is found to have violated America’s Clean Air Act, as US watchdogs claimed it has done. The EPA has the power to impose a $37,500 penalty per vehicle in contravention of law, meaning VW could face a theoretical penalty of $18bn for the 482,000 cars affected.

Allegations first surfaced late on Friday that America’s Environmental Protection Agency (EPA) believed VW fitted “defeat devices” to almost 500,000 of its diesel cars sold in the US.


According to the watchdog, these pieces of software sensed when a car was being tested for the amount of pollution it produced and activated full emissions controls.


However, the EPA claims that during normal driving, emissions control systems were not as effective, meaning cars pumped out far more pollutants, such Nitrous Oxides (NOx), which have been linked to serious respiratory diseases.



Having initially remained quiet after news broke, other than to say it was co-operating with the US authorities, VW broke its silence yesterday with Mr Winterkorn saying he was “personally deeply sorry that we have broken the trust of our customers and the public”.


Mr Winterkorn, who only recently won a power struggle that saw Ferdinand Piech ousted as VW chairman, added that “the trust of our customers and the public is and continues to be our most important asset” and that VW “does not and will not tolerate violations of any kind of our internal rules or of the law”.

*  *  *

It appears, Volkswagen needs to “spend” a little more to ensure its immunity.


Or implement another mega squeeze in the stock and crush everyone….

Back in 2008, Volkswagen briefly became the most expensive stock in the world on what would become the case study of an epic short squeeze when following some (malicious) capital structure drama, the short interest became greater than the total outstanding float, sending the stock up 500% in a few short weeks. German billionaire Adolf Merckle committed suicide as a result.


 The USA has about a 75% chance of a shutdown by Sept 30:
here is the background material:
(courtesy zero hedge)

“Time’s Up” – Government Shutdown Odds Spike To 75%

Two weeks ago, when no one was talking about the possibility of a government shutdown, we warned it was coming. Today, as Politico reports, with very little time left to reach a deal, budget experts project a 75% chance of a shutdown.

While a shutdown is anything but certain, of course. But it’s hard to see how the situation could change dramatically in the very short time left before the start of the fiscal year. It’s far more likely the odds will get worse rather than better. Politico’s Stan Collender’s most recent projection is that there is now a 75 percent chance of a shutdown. As he explains,

As an almost 40-year veteran of the federal budget wars and one of the few people who has served on the staffs of both the House and Senate budget committees, I’ve reached this lofty number by reading the budget tea leaves that others seem almost desperate to discount, disregard or ignore.


First and foremost, there is not enough time to reach a deal. Not only have none of the fiscal 2016 appropriations yet been signed into law, none have even passed both the House and Senate. With less than two calendar weeks (and far fewer days of potential legislative work) to go, the only way to keep the government from shutting down will be for Congress and the president to agree on a continuing resolution to fund the government for a short time while a larger deal is negotiated.


Such a short-term CR will be very difficult for any number of reasons, but the controversy over Planned Parenthood is perhaps the biggest one. The dispute over continued funding for the organization has added a hyperemotional element to what already is a hyperpartisan and dysfunctional budget process. Some Republicans have vowed never to vote for any legislation — including a CR — that maintains this funding, while the White House has promised to veto any bill that ends it. With Congress not likely to have the votes to override a veto, this issue alone could easily bring government operations to a halt on Oct. 1.


In addition, the dispute between the parties over military and domestic funding has so far been impossible to negotiate.Democrats want both military and domestic spending increased while Republicans have proposed an increase for the military but a reduction in domestic programs.

These already difficult issues are being made much worse by the often-extreme differences between House and Senate Republicans and the inability of the GOP leaders in both houses to control their members.

That puts Senate and House Republicans directly at odds. McConnell likely can’t get the Senate to adopt a CR that stops funding for Planned Parenthood while Boehner can’t get the House to adopt one that allows it to continue.


That means the speaker and majority leader might have to do what Boehner has done in past budget fights: work with Democrats to get the votes needed to move ahead. But House and Senate Democrats already have indicated that their votes won’t come cheap. Their demands could include all of the budget items Republicans don’t want, such as more funding for domestic as well as military programs, continued funding for Planned Parenthood and funding for the implementation of the agreement with Iran. They might also want something more, such as an agreement to begin the budget negotiations the White House has been requesting.


This total capitulation to Democratic demands will be very hard for House and Senate Republicans to stomach. It could cost Boehner his job as speaker and threaten McConnell’s authority as majority leader. It also is not at all clear that House Republicans or the four GOP senators running for president view a government shutdown as an event to be feared politically or that they are worried about being blamed should one occur. For some — including many of the same representatives who are threatening Boehner’s tenure as speaker — a shutdown would be the legislative equivalent of a reelection campaign event that energizes the Republican base and convinces constituents someone is fighting for them in Washington.

These House members point with glee to the results in the first election following the last shutdown in 2013. Not only did the GOP win nine seats and wrest control of the Senate, it won 16 more seats and increased its majority in the House. Why should anyone think, they ask, that the situation will be any different this time around?

*  *  *

As we concluded previously,there is more than one way that Congress could still avoid a shutdown at the end of the month. The most obvious option would be for House Republican leaders to bring “clean” spending legislation to a vote, with the expectation that it would pass with substantial Democratic support. To satisfy conservatives, the House could also vote on separate legislation to enact the specific policy changes some lawmakers are demanding, potentially via the reconciliation process, which requires only 51 votes in the Senate and therefore would allow congressional Republicans to send such a bill to the President’s desk (it would nevertheless be vetoed, but the effort might be enough to satisfy House conservatives). A second option would be to split off the controversial issues from the funding for other agencies, limiting the scope of any potential shutdown, similar to the strategy used in late 2014 to extend spending authority in the face of Republican opposition to the President’s executive action on immigration. However, it seems unlikely that congressional Democrats would support such a move this time around.

So will a shutdown occur? With a few weeks to go until the deadline, the outlook is very murky but our best guess is that Congress will narrowly avoid it. While there are several considerations that make a shutdown possible, as noted above, support for the current effort is still fairly limited. Prior to the 2013 shutdown, for example, 80 House Republicans signed on to the effort to oppose spending legislation unless it blocked funding for the Affordable Care Act (ACA, or Obamacare). By contrast, only around 30 have signed on to the current effort, though that number may rise.


More importantly, while the probability of a shutdown of some kind seems to us to be approaching 50%, we think the probability of a shutdown that has a significant effect on the financial markets or real economy is much lower, for two reasons.


First, unlike the 2013 shutdown, which coincided with the deadline to raise the debt limit, the next deadline to raise the debt limit is unlikely to be reached until at least mid-November. As shown in Exhibit 1, shutdowns that overlapped with debt limit deadlines—the 1990 and 2013 shutdowns—have tended to result in a stronger reaction in financial markets than other shutdowns where the debt limit deadline was not about to be reached.


Exhibit 1: Shutdowns create volatility mainly when they overlap with a debt limit deadline

Source: Bloomberg, Congressional Research Service, Goldman Sachs Global Investment Research


Second, a potential shutdown would probably be very short. In 2013, the shutdown ended up lasting longer than initially expected, in large part because the only natural deadline was the debt limit deadline, which was 2.5 weeks after funding lapsed. While one might argue that the lack of any deadline could lead to an even longer potential shutdown this year, it is more likely in our view that it would simply result in a decision to end the shutdown soon after it began, as has been the case with nearly every other government shutdown. In the 12 instances since 1980 that the federal government has shut down due to a funding lapse, the shutdown has lasted more than a week only twice. In 2013, we estimated that each week that all agencies were shut down would reduce real GDP growth in the quarter by around 0.2pp, though most of this effect would be reversed in the following quarter (after the first week, most civilian defense employees returned to work, reducing the economic effect of the final two weeks of what turned out to be a three-week shutdown).

It is too early to predict with any certainty whether a shutdown will occur, let alone how long it might last, but as the situation stands today, it seems likely to us that if a shutdown does occur it would have a smaller effect than the one in 2013.

*  *  *

SocGen is just as downbeat on the chances of avoiding a shutdown…

With the beginning of a new fiscal year less than two weeks away and no funding authorization in place, there is a growing chance of a Federal government shutdown. Congress will also have to increase or suspend the debt ceiling within the next 1.5 month as the Treasury is projected to exhaust so-called ‘extraordinary measures’ at some point in October or November.



No matter how immaterial in terms of their economic impacts, government shutdowns create uncertainty and thus influence Fed decisions. We already view the odds of an October liftoff as low and a government shutdown could lower them further. Although funding issues should be resolved by the December FOMC meeting, there is a small chance that the fiscal standoff extends into the end of the year (i.e. due to a temporary continuing resolution), creating another deterrent for the Fed.


I will see you tomorrow night
I will not deliver a commentary on Wednesday night

One comment

  1. Does anyone know what happens to the TED spread when the 3 mo treasury rate [denominator] drops to zero? How about when it drops to negative? Well, it’s negative right now. Instant drop from infinite to negative maybe???


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